Yankee Group Predicts No Capex Growth Until 2011

Yankee Group is predicting that telecommunications carriers globally will show measured caution in capital expenditures (capex) in 2009, decreasing from $284 billion in 2008 to $272 billion this year. Capex, as a percentage of revenue, will decline from 15.2 percent in 2008 to 14.1 percent in 2009, again reflecting conservative but necessary cuts for carriers, but also signaling tough times ahead for vendors.

"Unlike during the telecom ‘nuclear winter' of 2002, which saw capex spending fall off of the proverbial cliff, the current economic crisis is driving measured capex reductions," said Brian Partridge, Yankee Group Director and co-author of the report "Yankee Group's Global Telecommunications CAPEX Forecast." "Mobile and broadband services have crossed the chasm from luxuries to necessities, in the same vein as electricity and shelter. The centrality of core communications services is the main reason that operators will continue to grow revenue in this period. However, this will be tempered growth, and therefore carriers are rolling back spending to maintain the requisite levels of profitability that the market demands."

The report also predicts:

• Europe, Middle East and Africa will suffer the steepest decline. Capex will drop 10.9 percent, from $121.7 billion in 2008 to $108.4 billion in 2009. With declines largely in Western Europe, some emerging markets such as Turkey will experience capex growth.
• Asia-Pacific capex increases will offset overall global declines. Explosive growth in India and China will buoy some planned spending reductions in countries like South Korea and Taiwan, and will yield an overall capex increase of 11.5 percent, from $68.0 billion in 2008 to $75.8 billion in 2009.
• North America will experience responsible declines. Capex will drop 7.3 percent, from $71.3 billion in 2008 to $66.1 billion in 2009; however, capex as a percentage of revenue will only drop 1.5 percent.
• Latin America will experience only moderate downturns. Continued spending to meet customer demand in several emerging markets will offset some trouble spots, such as Mexico. Capex will decline only 5.1 percent, from $23.3 billion in 2008 to $22.1 billion in 2009.

Posted to the site on 1st April 2009