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Infonetics Reports on Capex

Carriers in North America, Europe, and Asia/Pacific are expected to increase their capital spending by 6% to just under $190B this year, says Infonetics

November 4, 2005

2 Min Read

BOSTON, Mass. -- Public carriers in North America, Europe, and Asia Pacific have increased their capital expenditures two years in a row now, and are expected to increase them again for a third consecutive year in 2005, according to Infonetics Research's Service Provider Capex Analysis reports.

Carriers in the three regions are expected to increase their capital spending 6% to just under US$190 billion in 2005 after 9% annual growth in 2004. Many of the increases reflect investments in next generation technologies like packet voice, broadband, metro Ethernet, and IP/MPLS routers. Capital expenditures are fairly balanced across the three regions, with North America, Europe, and Asia Pacific each representing approximately one-third of the total.

"We expect similar trends to continue in 2006 as incumbent carriers keep their capex-to-revenue ratio around 15% and carriers in emerging markets maintain higher capital intensities," said Kevin Mitchell, principal analyst at Infonetics.

"Chinese and Korean carriers are expected to decrease capex in 2005," Mitchell continued. "The anticipated 3% drop in capex in China is due mainly to the slowing down of massive buildouts. The capital intensity for Chinese carriers was over 30% in the last few years, which is an unsustainable ratio. Overall capex in the Asia Pacific region is the slowest growing."

"Although carriers in Western Europe far outspend their counterparts in the Eastern, Southern, and Northern regions of Europe, carriers in Eastern and Central Europe are increasing capex at a much faster pace than anywhere else in Europe."

Broadband Subscriber Growth (Cable Broadband + DSL)

  • Asia Pacific: grew from 36.7 million in 2Q04 to 57.3 million in 2Q05 (56% increase)

  • Europe: grew from 28.5 million in 2Q04 to 46.7 million in 2Q05 (64% % increase)

  • North America: grew from 33.1 million in 2Q04 to 43.1 million in 2Q05 (30% increase)

  • DSL continues to dominate in Asia and Europe, while cable broadband leads in North America by about 5 million subscribers

Capex Increases by Region

  • Asia Pacific: 3% growth expected in 2005

  • Europe: an increase of 6% expected in 2005

  • North America: 6% expected in 2005

Capex Increases by Carrier Type

  • North American incumbent carriers (US RBOCs, Canadian ILECs) will increase their capex 9% in 2005; MSOs are continuing to reduce capex, but are finding a leveling point

  • In Europe and Asia, competitive carriers are increasing capex at a faster pace than incumbents, although incumbents far outspend competitive carriers

Infonetics Research Inc.

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