Slow growth ahead for telecom service providers: report

Peter Dinham
Tuesday, 31 January 2012 00:57

IT Industry - Market

The global telecoms industry rebounded in 2011, with service provider revenues and capex growing robustly compared to the same period in 2010, according to a new analyst report, but the industry is facing a significant slowdown over coming years.

In a new report, the independent telecoms analyst, Ovum, found that service provider (SP) capex and revenues grew an estimated 12 per cent and seven per cent respectively in 2011, with capex reaching US$314billionn and revenues US$1,962billion.

However, Ovum is less bullish about future years, forecasting that SP revenues will advance at a CAGR of 2.9 per cent over the 2010-2017 period, markedly down from the historic CAGR of 6.3 per cent achieved in 2004-2010.

Ovum report author and principal analyst, Matt Walker, says there is a similar slowdown with capex. Walker says that capex expanded at a CAGR of 6.5 per cent in 2004-2010, but this will likely slow to 3.1 per cent in 2010-2017.

'2011 represents a good bounce-back for the industry. Macroeconomic weakness is constraining top-line SP revenue growth. Service providers are coping with this reality by aggressively attacking their cost structures, both capex and opex.'

On the capex front, Walker explained that SPs have a number of tools to control costs without necessarily sacrificing competitiveness. He says that network sharing, software-based network elements and features, pay-as-you-grow contractual terms, joint procurement, and M&A will all be important.

According to Ovum, on the opex side, carriers are increasingly turning to outsourcing, which the analyst firm says has helped expand the telco infrastructure services market to US$71billion.

'This shift of SPs' opex to external vendors through outsourcing will bring new opportunities, particularly in the area of services. Also, mobile operators' share of total capex will continue to advance, from 56 per cent in 2011 to 62 per cent in 2017,' Walker concludes.