US and European telecoms markets make way for Asia

13 June 2011 | Guy Matthews


How much longer will Europe and the US rule the telecoms roost?

On his recent visit to Europe, US president Barack Obama talked up the continued importance of US and European leadership in a world where the tectonic plates of power and influence appear to be shifting. In one of the big speeches of the trip, in Westminster Hall in London, he expressly rejected the notion that the rise of new superpowers, like China and India, was at the expense of US and European influence in the world. If one looks to the market for telecoms services as a bellwether of shifts in global power, then one does not exactly see Obama’s words borne out.

A recent report from Boston-based analyst firm Yankee Group shows that global telecoms-related capital spending is on the rise for the first time since the economic doldrums of 2009. In 2011, Yankee Group forecasts that capital spending by network operators will increase 2.9% over 2010. It expects every region of the world to show a rise of some sort, barring North America, where telecoms spending in 2011 will be down slightly on 2010.

Driving this global rebound in spending is pent-up consumer demand for mobile broadband services. Mobile operators all over the world are engaged on a network upgrade cycle driven by the roll out of 4G networks based on HSPA+, WiMAX and LTE. In emerging as well as developed markets, capital spending is on the rise in order that operators might meet the next-gen service requirements of consumers and enterprises.

If North America underwhelms with its telecoms spending, then China is exceeding expectations. Pundits had predicted that Chinese telecoms operators would slightly reduce their spending this year, but instead the combined investment of China Mobile, China Unicom and China Telecom on their networks is set to increase by an impressive 10% on 2010, from $35.3 billion to $38.9 billion. North American telecoms capex will decline this year by 3%, from $70.8 billion in 2010 to $68.7 billion in 2011. The momentum is clearly with China and other emerging markets.

And Europe? Yankee Group doesn’t break the continent down into separate countries, but what’s the betting that if it had, we’d see a mixed bag, with the indifferent economic performance of some countries reflected in sluggish capital spend. The heat, no doubt, would be most marked in eastern Europe and former Soviet nations where telecoms operators are building next-generation networks fit for the decade ahead, rather than shoring up legacy infrastructure designed for the last decade.