California-based research group iSuppli says telecommunications companies will spend nearly US$41 billion on equipment this year, a modest rise of 1.6 per cent.
The growth in total equipment spending is small, and represents a slowdown compared to the 10.7 per cent increase in 2006 and 8.3 per cent in 2005.
But with telco revenue growth expected to increase on ly marginally this year, iSuppli says spending increases have been directed at new revenue opportunities.
“The major reason for the slowdown is focused spending and a ‘pay-as-you–grow’ strategy among telcos,” according to iSuppli’s principal analyst for IPTV, broadband and digital home, Steve Rago.
“The marginal increase in 2007 spending is being driven largely by telcos’ purchases of equipment to deploy Internet Protocol Television (IPTV) services. iSuppli estimates $9 billion will be spent on IPTV-related communications equipment in 2007.”
The major motivation for companies to invest in IPTV infratstructure is the flagging fortunes of the their core voice communications businesses, Mr Rago said.
The telecommunications companies have been losing an average of 4 per cent annually from their subscriber base, and more than 4 per cent per year from voice revenue, he said.
The phenomenon is universal, with no region and no telecommunications company unaffected.
“The telcos hope their massive investments in IP broadband networks and IPTV will pay dividends in terms of a new source of revenue from providing video and other multimedia services to consumers,” Mr Rago said.
Global IPTV subscribers will soar to 105.8 million in 2011, rising at a stunning 98 per cent compound annual growth rate from 3.4 million in 2006, iSuppli predicts. To serve this huge base, the telcos’ IPTV budget will have to grow to account for 20 per cent of their total capital spending by 2011, including networking equipment, software and customer premises equipment.
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