Market Insight

RESEARCH NOTE - Telecom Capex Growth Hamstrung by Regional Investment Decoupling

December 21, 2016


Want to learn more?
Have an expert contact you.

Following is information and insight from IHS Markit about our H2 2016 Telecom Trends and Drivers Biannual Market Report, which includes data for the half-year ended June 30, 2016.

Highlights

  • The 2011‒2015 telecom investment cycle driven by Long Term Evolution (LTE) is over
  • 2016 marked the start of a new trajectory of decoupled and desynchronized investments among the major geographic regions that will result in long-term flatness in the telecom sector
  • Overall global economic health is improving, growing in the low single digits in 2016

Our Analysis

2015 marked the end of a five-year global investment cycle that started in 2011 driven by massive LTE rollouts and their related fixed networks (core and transport). This cycle was characterized by synchronization between geographical regions, low single-digit yearly growth resulting from fewer but larger service providers that enjoy economies of scale, and various regional and national agendas.

2016 was the beginning of desynchronized investments between regions that will result in global flatness through 2017 and a pickup in 2019, potentially driven by “related” 5G spending—although we have clear indications from frontrunners KT, NTT DOCOMO and SK telecom that they don’t expect a major capex hike. Rather, fiber-based fixed broadband and backbone networks will be the major areas of spending.

As a result, we expect global telecom capex to increase at a five-year (2016‒2020) compound annual growth rate (CAGR) of 0.8 percent, reaching US$353 billion in 2020. This forecast is based on the assumption that an economic recession or other major event will not derail our model over the next four years. 

Brighter Days for Europe’s Big 5

Europe’s five largest service providers, known as the “Big 5” (Vodafone, Deutsche Telekom, Orange, Telefónica and Telecom Italia), have finally turned the corner, switching from five consecutive years of unabated revenue decline to moderate growth in 2016, signifying some much-needed stabilization.

Global Economic Growth Prospects Looking Up

IHS Markit’s macroeconomic indicators point to moderate global economic growth of 2.5 percent in 2016 due to a mix of stronger growth in the U.S., Canada, Eurozone, United Kingdom and Japan partially offset by weaker growth in Brazil, China and India.

The J.P. Morgan Global All-Industry Output Index, compiled by IHS Markit, advanced 1.6 points to an 11-month high of 53.3 in October 2016, indicating a broadly based acceleration in global economic activity.

Global real gross domestic product (GDP) is projected to increase 2.8 percent in 2017 and 3.1 percent in 2018.

Telecom and Datacom Report Synopsis

The telecom and datacom trends and drivers report provides analysis of global and regional market trends and conditions affecting service providers, enterprises, subscribers and the global economy. The report assesses the state of the telecom industry, telling the story of what’s going on now and what’s expected in the near and long term, including spending trends, subscriber forecasts, macroeconomic drivers and key economic statistics (e.g., unemployment, OECD indicators, GDP growth). The 20-page report is illustrated with charts, graphs, tables and written analysis.

 

Geography
Global
Research by Market
Mobile & Telecom
Share facebook Twitter Google Plus Linked In Add This Contact Us