After two years of dismal decline, a new report says services providers will ramp-up capital expenditure by 9 per cent next year. Martyn Warwick reports.
A new report from research house Ovum confirms that service providers have been reining-in hard on capital expenditure during 2010 as the echoes of the economic downturn continue to reverberate through the global comms industry.
Capex fell by a swingeing 8 per in 2009 and the squeeze has continued throughout this year as well. It is expected a that a further drop of 4 per cent or even more will be reported for 2010.
However, Ovum is upbeat on the prospects for 2011, saying that it expects capex to bounce back bigtime and that services providers will up their capital expenditure by 9 per cent next year. That's the equivalent of US$303 billion.
However, even that huge figure will still leave total capex spend below what it was in 2008 but it does seem likely that, at last, the sector will be striking back.
And it will be doing so on the back of a modest increase in revenues. Service provider income fell by 2 per cent in 2009 but that was clawed-back during 2010 and by the end of this year SP's are expected to report modest growth - in the region of 2 per cent or so. Not earth-shattering, but better than a poke in the eye with a burned stick. Ovum says this should increase to 3 per cent or even a bit more in 2011, when Service Providers collectively will be enjoying total revenues of $1,854 billion.
The Ovum report says that "pockets of strong growth" still exist in parts of the service provider sector for fast-acting companies to exploit but adds the caveat that long-term, sustainable success and even survival will depend upon player's willingness, ability and determination to re-invent themselves and adapt or even completely change their business models.
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