Operator earnings back on track

Dylan Bushell-Embling
13 May 2011

The telecom sector showed signs of returning to steady growth in 2010, according to figures from Ovum.

Global service provider revenue grew to $1.85 trillion in 2010, up 4% from 2009, the research firm estimates. This is a reversal of the 4% decline from the year before.

Signs of recovery were also seen across metrics including operating cashflow, ebitda and profit margins.

While capex declined 3% in 2010, this was also an improvement on the 9% decline seen in 2009, Ovum said. And capex rose 2% year-on-year in the fourth quarter – the first capex increase since the financial crisis hit.

“There is usually a fourth quarter budget flush, but 2010 was stronger than 2009, when most carriers remained jittery,” Ovum analyst Matt Walker said.

While APAC had the second best capex growth by region in 2010, this excludes India, where capex fell 39%, and China, where it dropped 19%.

Despite the depressed spending in some markets, walker said that while “it's too early to break out the champagne just yet, within the context of a slowly improving global economy, the telecoms sector is returning to sustainable growth.”

But recovery could be threatened in the wireless sector if reports of an anticipated 33-fold increase in mobile traffic over the next decade ring true.

The UMTS Forum has published research estimating that mobile voice and data traffic will grow to 127 exabytes in 2020.

Growth will be even stronger in Europe, where the UMTS Forum estimates that the typical Western European country will be consuming 12,540 terabytes of traffic daily in 2020 – up 67x from 2010.

Most of the growth will come from data traffic, with voice growth to be limited, according to the study conducted by European analysis and consulting firm IDATE.

Mobile operators could face margin pressures and be forced to increase capex if traffic swells at the projected rate.

In addition, UMTS Forum warned that international approaches to mobile data, such as the ITU-R framework, will need to be changed to accommodate the anticipated data surge.

“These latest forecasts are of particular interest in the context of discussions about availability of sufficient spectrum to support the continuing growth in demand for mobile broadband services,” UMTS Forum chairman Jean-Pierre Bienaime said.

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