Mobile network capex on the rise

Dylan Bushell-Embling
06 Jun 2011

Mobile operators are ramping up network spending in 2011 in the face of continuing economic uncertainty, but face the prospect of costs exceeding revenues by as early as 2015.

Global mobile network capex is on pace to grow 5% in 2011 to reach $119 billion, ABI Research forecast on Friday.

Operators see a clear need for capital investment despite the ongoing economic uncertainty in the US and Europe, the research firm said.

Over half of overall capex is going towards base station deployments, upgrades and replacements. But core network spending is also on the up, and is likely to near $12 billion for the year.

“Operators are still investing in improving the downlink and uplink performance of their networks, not just on LTE but also HSPA+,” ABI Research vice president Jake Saunders said, noting that deployments of small cells such as femtocells are also becoming more popular.

But capex growth is symptomatic of the rising costs operators are having to deal with.

Juniper Research last week warned that mobile operators may face a “nightmare scenario” whereby costs exceed revenues in as early as four years.

Although the analysts predict that global operator revenues will exceed $1 trillion by 2016, market saturation as well as flatlining and even declining core revenue and ARPU threaten to wipe out these gains.

Earnings are also under peril from skyrocketing mobile traffic growth, which should hit nearly 2.5 exabytes worldwide by 2015, the research firm said.

Juniper's warning mirrors predictions from a UMTS Forum-commissioned report published last month, which forecast 127 exabytes of global mobile voice and data traffic by 2020.

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