3G Capex Rises

OYSTER BAY, N.Y. -- Two years ago, announcements of capital spending on 3G deployments were mainly made by the largest operators in the most developed nations, but today many smaller and incumbent operators in developing and less saturated markets are also increasing CAPEX as they roll out 3G networks.

Because 3G signals travel shorter distances than 2G's, particularly in the case of W-CDMA, more cell sites are needed: 3G can require four to five times as many base stations to obtain the same coverage as 2G networks.

ABI Research analyst Shailendra Pandey says, "In spite of falling prices for 3G infrastructure, building a 3G network with good coverage is expensive and time-consuming. For a mobile operator, 3G network CAPEX spending depends on the reusability of its existing 2G equipment and infrastructure."

Existing coverage also determines the requirements for complementary wireless technologies such as GPRS, EDGE, Wi-Fi and WiMAX. If the existing core/backhaul network is IP-based then additional costs are lower than those associated with a circuit-switched network, whether the shift is to W-CDMA or CDMA2000. Most operators with GSM networks prefer to introduce a GPRS platform first to increase usage of data services, and then migrate to 3G networks later.

Operators' motivations for network spending have changed over the years, especially in mature markets. Once, network capacity requirements and market share growth through subscriber acquisition were the key motivators for CAPEX investments in mobile networks. But in an increasingly competitive and complex marketplace, high saturation levels, rapid technological changes and falling voice ARPUs are all affecting mobile operators' profitability. The needs for higher ARPU and reduced OPEX (operational expenses) are prompting them to invest in 3G and 3G-based technologies, and to support advanced data services by adding network infrastructure.

ABI Research expects that the majority of operators worldwide will invest in W-CDMA networks in the next five years. However in North America, CDMA2000 will continue to be the dominant technology in terms of CAPEX investments, and operators will continue to deploy 1xEV-DO networks although investment in W-CDMA will roll out as well.