Global Telecom Capital Investment Has Fallen in 2012

By Gary Kim October 26, 2012

What seems like an endless wave of job cuts in the telecom equipment supplier industry has been going on for more than a year, separate from the background shrinkage for more than a decade.

Among the latest is Ericsson, the largest global supplier of mobile network infrastructure, according to Bloomberg.

Ericsson AB reported a 43-percent decline in third-quarter profit as wireless operators curbed spending in a sputtering economy.

Net income fell to 2.18 billion kronor ($324 million) from 3.82 billion kronor, Stockholm-based Ericsson said today. Gross margin, or the percentage of sales remaining after production costs, slid to 30.4 percent from 35 percent, missing the 32.2 percent average of analysts’ estimates.

The clear evidence of investment in Long Term Evolution notwithstanding, it is clear enough that other projects are being postponed. Telecom capex fell in the wake of the Great Recession of 2008, as would be expected.

Spending picked up by 2010, but it now appears more stringency has returned. 

The problems are arguably centered in the European markets. Mobile capital expenditure in Western Europe contracted 3.8 percent quarter-over-quarter in the first half of 2012, even though mobile operators are building out coverage for 4G, and to a lesser extent enhancing capacity and coverage of their 3G networks, according to ABI Research

Year-over-year growth was down significantly - 19 percent. 

“Overall capital expenditure for the region is expected to drop 12 percent to $14.4 billion for the full year of 2012. Western European carriers are at different stages in development, which will very likely affect 4G adoption patterns,” said Jake Saunders, VP for Forecasting at ABI Research.

Edited by Braden Becker

Contributing Editor

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