Telco capex rises sharply amid 5G and fiber investment

Global telco capital expenditure (capex) is at its highest in more than ten years, according to research by MTN Consulting. At the end of June 2022, the research company calculated that telco capex came to $329.5 billion over the preceding 12 months.

Several factors have contributed to the sharp rise in telco spending worldwide over the year ending 20 June 2022. A large part of the explanation, explains MTN Consulting, is that communications service providers (CSPs) are simply making up for time lost during the Covid-19 lockdowns, which depressed network spend and roll-out, as MTN Consulting’s graph below shows.

At the same time, telcos are finally scaling up 5G deployments and starting to build out 5G SA core networks – although a recent GSMA report highlights regional variations in 5G roll-out, with Europe still lagging behind other areas of the world. It estimates that 5G coverage in 34 European markets will rise to 70% in 2025, compared to 98% or higher South Korea and the US. And by 2025, according to the GSMA, the UK and Germany will have the highest 5G adoption rates in Europe at 61% and 59% respectively, which compares to 73% in South Korea and 68% in Japan and the US.

Telcos are also spending on fiber, notably in the US, but also in Europe, Australia, China, and India, says MTN Consulting, as CSPs both lay FTTx networks and connect new 5G radio infrastructure.

Huawei, Ericsson and Nokia are among the companies benefiting from the renewed spending on network infrastructure. Huawei is still at the top of the global telco network infrastructure market, with MTN Consulting estimating its share stands at 18.7%, followed by Ericsson with 10.9% and Nokia with 8.9%. Huawei’s continued success is partly due to its domestic market dominance, in addition to loyal overseas customers. “China’s capex has been growing recently,” according to the research company. “For the 2Q22 annualized period, Chinese telco capex totaled $58.3B, up 12% from 2Q21.”

The other beneficiaries of increased spend are the hyperscalers. As MTN Consulting points out, 5G cores are software-centric, which has created new markets for AWS, Microsoft’s Azure and Google Cloud Platform. It calculates that hyperscalers’ collective revenues from the telco industry amounted to $3.4B for the 12 months ended June 2022 – a rise of nearly 80% over the course of a year.