COVID-19 impact spares telecom capex: Analyst

Oct. 8, 2020
Dell'Oro Group recorded stable growth in 1H2020 in telecom capex.

A recently published report from Dell'Oro Group states that following three years of declining telecom capex trends between 2015 and 2018, preliminary market readings suggest that the industry upswing that began in 2019 extended into the first half of 2020.

The market researcher for the telecommunications, networks, and data center IT industries reports that worldwide telecom capex—the sum of wireless and wireline telecom investments—recorded stable growth in 1H2020 in nominal US Dollar terms, and is advancing at a mid-single-digit rate under constant currency conditions.

"We are still operating in unchartered territories but at this point, it appears that the market sentiment for infrastructure investments is improving and the nadir is now in the past," said Stefan Pongratz, vice president and analyst with the Dell'Oro Group.

According to Dell'Oro Group's September 2020 3-year telecom capex forecast:

The telecom industry is not immune to COVID-19 but the negative impact in slower to adopt MBB markets will likely not be as severe in this recession as in previous downturns. Global capex growth for the 2019-2022 period is projected to improve at a CAGR of 2 percent, underpinning projections that the outlook remains favorable with wireless capex advancing at a 4 percent CAGR.

Dell'Oro's Pongratz added, "We attribute the disconnect between the underlying economy and aggregate capex developments to three key factors including the dependence on connectivity, the transition from 4G to 5G, and the fact that the nature and duration of this recession appear to be different than the typical downturn."

The analyst cautions that constrained operator revenue growth is expected to be one of the primary inhibitors of further telco capex acceleration.

The Dell'Oro Group Telecom Capex Report provides in-depth coverage of more than 50 telecom operators highlighting carrier revenue, capital expenditure, and capital intensity trends. The report provides actual and 3-year forecast details by carrier, by region by country (United States, Canada, China, India, Japan, and South Korea), and by technology (wireless/wireline).

For more information, contact Dell'Oro Group at +1.650.622.9400 or visit www.delloro.com

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