Capital expenditures in telecom – and the wireless segment within that overall category – look fairly healthy, at least in North America.
In the states, the recession is abetting, which for mobile operators usually would spell a period of high capex. The money would be more freely available, more people would be spending on services and pent-up demand – projects that had been put on hold – would be undertaken.
The current dynamic may be a bit different. Demand, despite the recession, has been increasing quickly. Despite the poor economic climate, the industry bowed to the inevitable and spent tons of money migrating from 3G to 4G LTE networks. Indeed, if 4G had not come of age during the recession, the year or so immediately afterwards probably would have seen far more capex as carriers tried to patch and mend 3G networks. But it didn’t roll out in this way. The explosion of wireless made aggressive moves during the recession unavoidable.
That all means that radical increases in capex won’t be forthcoming. However, the spending on LTE isn’t over. Last week, ABI Research released wordwide capex predictions for 2013. The North American capex increase was pegged by the firm at 2.1 percent. Analyst Jake Saunders is quoted in the release as saying that the “accelerated LTE equipment spend programs” from the major carriers will “concentrate” expenditures. It’s worth noting that capex in Western Europe will contract 1.1 percent as the economy continues to be a question and networks are completed.
Infonetics also assessed capex. In its report, which was released last month, the firm predicted that the 2012 worldwide increase in capex would be about 4 percent. The firm said that the way was led by Asia and North America. Analyst Stéphane Téral was quoted as saying that 2013 “is looking bright for all regions.” The release has many interesting bullet points, including the fact that spending by incumbents is flat to slightly down – but the mediocre performance is more than compensated for by healthy spending by independent wireless and competitive operators and cable MSOs.
At Seeking Alpha, Ahmed Ishtiaq wrote a story about Verizon finances, including capex for Verizon Wireless it co-owns with Vodafone. Here is what he writes on capex in general and on Verizon’s position:
In order to exploit these growth opportunities, the companies have to make huge capital expenditures. Growing a network demands substantial investment in infrastructure and new equipment. It is expected that the growth in data usage will outpace the growth in the technological advancement and network expansion. As a result, there could be a potential spectrum shortage. Over the past twelve months, the company has spent $18.6 billion in capital expenditures. However, heavy capital expenditures have enabled the company to have vast coverage and extensive network.
In the comments to the piece, Ishtiaq wrote that he expects Verizon’s 2013 capex to be flat compared to 2013. That isn’t necessarily a pull back since the company was aggressive in 2012.
It’s been an interesting time for the wireless industry; transitioning infrastructure generations in the midst of a serious recession always is. The good news for wireless carriers is that demand continues to grow as the economy improves. That puts them in an enviable position.