Feature Article

January 17, 2013

US Mobile Operator Capital Expenditure will Grow in 2013 Amid a Mixed Global Market

ABI Research has a new study out, titled Mobile Operator CapEx, which focuses on the regional and global mobile operator capital expenditure. These CapEx studies include base station and core network spend, and provide a measure of wireless operator investment, and in turn, provider health.

The new ABI report on this front reports that worldwide mobile operator capital infrastructure expenditure for 2013 will experience opposing forces, depending on which regional markets the mobile services providers operate in. In North America, for example, mobile carrier CapEx will grow 2.1 percent to $13.4 billion. This increase is due almost entirely to the ongoing and accelerated growth of LTE, which in turn drives LTE equipment spend.

AT&T, Verizon Wireless, T-Mobile, and Sprint are all concentrating spending in 2013 on this front.

In Western Europe, however, the report forecasts that capital expenditure will contract by at least 1.1 percent, as maturing networks and economic uncertainty trim CapEx. These same factors suggest revenue pressures on the carriers in this regional area as subscribers hold back on their own spending. LTE build-out in Western Europe has not been aggressive - especially relative to North America, and as revenue pressures hit the carriers, CapEx is decreasing - limiting the expansion of services these carriers can provide.

In a sense it’s a catch-22, but unless economic uncertainty decreases nothing will change here.

The Asia-Pacific region on the other hand, is a mixed bag of aggressive build-outs and "wait and see" strategies. South Korea and Japan are rapidly acquiring LTE subscribers and adding LTE capacity. China, perhaps counter-intuitively, given its huge and growing mobile subscriber base, hasn't yet awarded any LTE licenses. The Southeast Asia countries are starting to demonstrate some traction in LTE but even here - again these areas with rapidly growing mobile subscriber bases - aren't moving as quickly as one might expect.

India, for example, had awarded some LTE-TDD licenses in early 2012 but a lack of affordable LTE-TDD capable handsets, and high tariffs, have kept Indian LTE-TDD subscriber adoptions in check.

In Eastern Europe, on the other hand, looks to be better positioned and more progressive. As might therefore be expected, ABI's forecasts anticipate reasonable growth here of 2.4 percent in CapEx. As with North America, this increase directly reflects LTE coverage build-out by carriers.

However, there is also a key build-out in 3G capacity. Why? Because 3G subscriber adoption has risen beyond 41 percent penetration for the region.

The Middle East, Africa and Latin America will show likely growth in capital expenditure of around one percent to 3 percent. These markets are markedly different than their more developed counterparts. Here, voice-centric coverage is still important, and is now largely complete. Some operators are beginning to address 3G in-fill and mobile data capacity challenges, but it is absolutely clear that there has not been a "data crunch" here yet - certainly nothing like we continue to see in the developed markets.

What is the overall end result when each of these markets is evaluated as a global whole? As a result of the countervailing fiscal forces and data needs outline above suggest, ABI forecasts that worldwide capital expenditure will contract by seven percent to $98.6 billion in 2013.

As the rest of the world begins to build up demand for wireless data, this global CapEx number will change. In fact it will happen quickly, and ABI predicts that because of ongoing and emerging LTE build-outs we can expect to see a substantial global boost overall in mobile carrier CapEx. In dollars, ABI translates this into growth of 6 percent to $ 104.5 billion in 2014.

That is a substantial change from one year to the next.

Edited by Braden Becker

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