The Return of CapEx


The economists and other financial wizards (some of whom were responsible for getting us into this mess in the first place) say the recession is slowly ending and that better times are ahead. The thinking seems to be that things will gradually start to improve by the end of the year.

How will the telecom segment react? Two studies released during the past few weeks take a look at the industry. It's an interesting topic, since the wired and wireless segments and the players within them have their own preexisting struggles and challenges that go beyond the overall state of the economy. The recession may have put these problems on hold, and their impact may be felt once the economy is back to normal.

Infonetic's Stephane Teral says that the first half of 2009 was "ugly"
for vendors because service providers weren't spending. Currently, he says, revenue for telcos "continues to show resilience" and mobile Internet usage is up. The report, which looks at things on a global basis, says that capital expenses experienced the last year of a five-year investment cycle in 2008, when $298 billion was spent. Worldwide, there will be a 2.8 percent capex downturn this year, next year will be flat and a new investment cycle will begin in 2011. Mobile infrastructure will lead the parade.

ABI Research also looked at the worldwide capex expenditure picture, though the firm focused on wireless. The firm laid out three possible scenarios. The most pessimistic suggests growth of 1.5 percent between 2009 and the end of next year. The most optimistic pegged the rate at 3.7 percent. The release doesn't say what the middle course will be. Senior analyst Aditya Kaul says that the return to spending next year will be due to competitive pressure and will aim at improving capacity and coverage.

The studies can't be compared, since they take slightly different angles. But the feel is that the worst is over. The question is how quickly the wired and wireless segment will rebound and how strongly the issues that were impacting the sector before the recession will reassert themselves.