Telcos score big with $1.85 trillion in 2010

Stan Beer
Tuesday, 10 May 2011 10:26

IT Industry - Market

Telecoms service providers throughout the world harvested a fortune in 2010, growing their revenues by 4% in 2010 to reach a massive US$1.85 trillion, according to new figures. Much of the growth was driven by mobile carriers in the new global engine economies, such as Brazil, Russia, India and China.

According to telecoms analyst, Ovum, which studied the 2010 financial performance of telecoms carriers across the globe for a new report, the 4% growth represents a notable improvement from 2009, when revenues fell by 4%.

Meanwhile average profitability showed positive signs, as measured by metrics such as operating cash flow and net profit margins, EBITDA (earnings before interest, taxes depreciation and amortisation) and net debt.

Matt Walker, Ovum principal analyst and author of the report, commented: 'It's too early to break out the champagne just yet, but within the context of a slowly improving global economy, the telecoms sector is returning to sustainable growth.'

In terms of the opportunity for vendors, although service provider capex declined by three% in 2010, this was an improvement from the nine% capex decline in 2009. Significantly, in the fourth quarter of 2010, carrier capex rose two% when compared to the fourth quarter of 2009.

This modest year-on-year (YoY) service provider capex increase was the first such growth since the fourth quarter of 2008 - the year the financial crisis hit - and is another sign that recovery in the telecoms sector is on track. The Asia-Pacific region excluding China & India had the second best regional capex growth in 2010, versus 2009, up 4.4%; India's 39% drop was the poorest result. Ovum is optimistic on India's pick up in 2011-12. China, on the other hand, fell by 19%, dropping capital intensity down to 26.6%, the lowest since 2006.

Walker commented: 'The late pick-up of global capex in 2010 drove the full-year results. There is usually a fourth quarter budget flush, but 2010 was stronger than 2009, when most carriers remained jittery. Vendors who have faced several quarters of lean times are certainly happy to see the capex tap turned on again.'

Most of the big vendors enjoyed healthy top-line YoY growth for the fourth quarter of 2010. The best performing of the larger vendors included ZTE and Juniper, with 40% and 26% YoY revenue growth respectively. Alcatel-Lucent and Ericsson also did well with YoY growth of 13% and 11% respectively. Meanwhile, Nokia Siemens Networks' (NSN) revenues in the fourth quarter of 2010 grew by 0.5% to hit $5.4 billion, NSN's first positive YoY revenue growth since the third quarter of 2008.