December 28, 2016 | CAPEX
The predictions are in – leading market research and analyst firms reveal the expected investment pattern of the global telecom sector. Following an initial dip in 2017, capex in this segment is set to increase at 0.8 percent CAGR and touch the $353 billion mark in 2020.
The previous equipment investment cycle in this sector, from 2011 to 2015, was driven by Long Term Evolution (LTE) rollouts and related fixed networks. The current cycle is expected to be driven by a handful of large service providers, and various regional and national agendas. Significant 5G-related spending is expected in 2019 from operators looking at strengthening their fiber-based fixed broadband and backbone networks.
In the coming years, leading telecom service providers will focus on reducing capex as well as opex by transforming their infrastructure. Many communications service providers will invest in IT systems, cloud, and big data analytics to optimize their network and enable customer centric services. Internet of things (IoT), operations and business support systems (OSS/BSS) transformation and Network Functions Virtualization / Software Defined Networking (NFV/SDN) will help enterprises drive better efficiencies and improve service offerings. These providers will seek alignment with the digital services market to play an active role in the digital transformation of economies around the world and multiply revenues. As an example, within the past three years, T-Mobile increased its revenues by 48 percent with significant contributions coming from their digital offerings.
Service providers that do not take the full-fledged digital route, but choose to remain traditional and only adopt a few digital technologies will enhance overall efficiencies and improve customer delivery. However, this segment faces the risk of losing out to over-the-top players like Google.
With leading players in Asia such as China Mobile, Reliance Jio, and Bharti Airtel invested in 4G, it’ll be another couple of years before we see significant investments in 5G. However, it is predicted that by the end of 2022, there will be more than 550 million 5G users globally. This growth in the number of 5G users will also drive greater traction for IoT, if hurdles such as cyber security risks and low ROI are addressed.
Major economies across the globe are poised to witness an increase in their GDP and this will translate to revenue growth for telecom operators. However, to know how well this sector adapts and optimizes growth opportunities and carves new inroads into the digital future, we will have to wait and watch.