North American service providers' capital expenditures totaled $68.6 billion in 2006, up 8% from 2005, and are projected to increase 12% to $76.7 billion in 2010, according to a new report from Infonetics Research.
The report also shows that despite strong M&A activity among telcos like Verizon, MCI, AT&T, BellSouth, and Cingular that created several months of investment disruption, RBOCs, Canadian ILECs, and cable MSOs increased their capex in 2006, and will increase it again through at least 2009 to sustain their major projects.
"The third year of the new investment cycle we identified previously is now starting, and is expected to plateau in 2009 or 2010. The service provider landscape that has emerged in North America is dominated by two giant telcos, AT&T and Verizon, and a cluster of powerful cable MSOs such as Cox, Time Warner, and Comcast. As everyone is entering everyone else's turf (telcos are offering IPTV, cable MSOs are offering VoIP, for example), the convergence between information technology, media, Internet, and telecommunications is adding new competitive pressures that are driving this new investment cycle," said Stéphane Téral, principal analyst at Infonetics Research.
- Over the 5-year period from 2006 to 2010, North American service providers will spend a cumulative $369.6 billion on capital expenditures
- The combined revenue of all public North American carriers inched up 3% in 2006 to $403 billion
- Capex-to-revenue ratios are expected to remain stable at around 17% through 2008 due to a number of mid-term projects, and then will trend down to about 16% in 2010
- AT&T, Sprint Nextel, and Verizon together will make up 61% of total public service provider capex in North America in 2007, driven by AT&T's Project Lightspeed FTTN and Verizon's FTTP initiative - Incumbent cable MSOs plan to spend over $15 billion on capital expenditures in 2007 as they continue investing in all IP network migration
- Of the capex going to telecom and datacom equipment, the top three investment areas in 2006 were voice, mobile RAN, and optical equipment
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