& cplSiteName &

India to Record Surge in Capex This Year

Gagandeep Kaur
1/29/2017

India and China are likely to retain their top spots for capital expenditure on telecom networks this year, as spending dips in more developed markets.

In North America, Western Europe, Japan and Australia, operators look set to reduce spending in 2017 following a wave of investment in 4G and fiber networks. While China's operators have also made heavy investments in 4G, China Mobile Ltd. (NYSE: CHL), the country's biggest service provider, still aims to spend as much as $27 billion this year, compared with the $17.4 billion that US counterpart Verizon Wireless intends to invest.

Indeed, according to a report from IHS Market, a market-research company, the Asia Pacific, which obviously includes the big developing markets of India and China, will account for a bigger share of spending in 2017 than any other geographical region.

Analysts also believe that India will record an increase in spending this year, compared with 2016. The pace of 4G deployment clearly picked up last year after the disruptive launch of Reliance Jio , India's newest service provider. Moreover, negative publicity about the problem of dropped calls is forcing operators to improve the quality of service they offer customers. That means pumping extra funds into network modifications.

"This year Indian telcos will be spending on expansion of 4G networks beyond the metros and tier 1 cities," says Amresh Nandan, a research director with Gartner Inc. "The service providers will also be investing to improve their radio access networks, but telcos are realizing that RAN itself is not going to improve quality. The backhaul network, especially between cell sites and the core, also has to improve."


For all the latest news from the wireless networking and services sector, check out our dedicated Mobile content channel here on Light Reading.


Another key network development in India is likely to be a move away from microwave technology for backhaul purposes. "Indian telcos are still heavily dependent on microwave for backhaul and this needs to change," says Nandan. "Besides this, the service providers will also be making improvements on the application side. That didn’t happen so much last year."

Growth in capex this year would follow several years of spending increases in the country. According to the GSM Association (GSMA) , which represents the interests of the mobile industry, service providers have invested a total of $23 billion in the last five years, and this figure is likely to increase to around $34bn by the end of 2020.

"India remains a highly capital-intensive market, reflecting in part heavy spectrum reserve prices, says a recent report from the GSMA. "Operating cashflow margins stood at just over 12% in 2015, around three percentage points below the regional average and six below the global average. Although cash flow margins are expected to increase across the rest of the region, competitive pressures and network investments mean margins in India will remain subdued."

It is this pressure on margins, coupled with the entry of a disruptive player in the form of Reliance Jio, that has triggered consolidation in the Indian telco space, with Reliance Communications Ltd. recently acquiring Sistema Shyam TeleServices Ltd. and Aircel Ltd. and Bharti Airtel Ltd. (Mumbai: BHARTIARTL) buying Videocon Telecommunications Ltd. Such M&A activity is likely to have an impact on capital expenditure by telcos.

"The service providers will want to see which companies are finally going to be present in the market before they announce significant capex commitments," says Nandan.

— Gagandeep Kaur, Contributing Editor, special to Light Reading

(1)  | 
Comment  | 
Print  | 
Newest First  |  Oldest First  |  Threaded View        ADD A COMMENT
Vishnu Goel
Vishnu Goel
1/30/2017 | 2:46:35 AM
India Capex will be highly dependent on Technology modeling
This is very interesting perspective of Telecom Capex spending,as India makes progress on tech model movement and Virtualisation happening in the network elements.The comparative position of Capex in AsiaPac will not change drastic difference in next three years as couple of countries lower in rung will keep trading places.Vishnu Goel T&M+919810101238
Featured Video
Upcoming Live Events
October 22, 2019, Los Angeles, CA
November 5, 2019, London, England
November 7, 2019, London, UK
November 14, 2019, Maritim Hotel, Berlin
December 3-5, 2019, Vienna, Austria
December 3, 2019, New York, New York
March 16-18, 2020, Embassy Suites, Denver, Colorado
May 18-20, 2020, Irving Convention Center, Dallas, TX
All Upcoming Live Events