Global telecoms capex declined in 2023 as large telcos completed 5G rollouts

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Summary

Omdia recently published the 2023 update of its Global Telecoms Capex Tracker, a detailed database of telecom operator capex from 2019 to 2023 (see Further reading for a link). This report covers the major recent developments in telecoms capex and highlights from the latest update of the tracker. Notably, global capex and capital intensity fell year-over-year (YoY), driven by network capex cuts.

Omdia segments capex estimates into the taxonomy shown in Figure 1, which broadly maps to our technology market research coverage. The thickness of each bar represents the share of capex allocated to each category. Note that Omdia excludes spectrum acquisitions.

Figure 1: Global telecoms capex flow, 2023

Capex fell by 7%, driven by the access network and civil infrastructure

Global telecoms capex decreased by 7% YoY to $330bn in 2023, while revenue grew by a modest 1% to $2,002bn. Consequently, capital intensity (capex divided by revenue) fell to 16.5%, down over 1% from 2022. 61% of capex was allocated to the network, and 39% was allocated to non-network categories.

Access network and civil infrastructure capex fell by 6% and 7% YoY, respectively, in 2023. Major operators concluded significant 5G network rollouts in 2023. For example, Verizon spent only $1.8bn on its C-band spectrum buildout in 2023, compared to $8.2bn between 2021 and 2022. Deutsche Telekom’s (DT’s) US subsidiary, T-Mobile US, also reported a significant reduction in capex due to higher outflows in 2022 to accelerate the buildout of 5G (and integrate Sprint). Across the Pacific, China Mobile reported a reduction of spending on 5G of 8% YoY in 2023.

Note that civil infrastructure capex is generally highly correlated with access network capex, as much of it is related to network construction. Network rollouts have accelerated elsewhere in the world (e.g., by Airtel and Jio in India), but those increases in capex have been heavily outweighed by the decreases in other regions.

The “other” category also contributed to the fall in capex due to the continuing trend of telcos divesting non-core business functions (e.g., DT’s sale of 51% of GD Towers in February 2023) and focusing more on core connectivity. Moreover, the global economic environment of relatively low economic growth, combined with high inflation rates in 2023, put pressure on operators to limit expenditures where possible. Investments that would fall under the other category have decreased as a result.

Telcos that increased capex did so mostly outside the mobile network

Omdia’s Global Telecoms Capex Tracker includes company-level segmented capex for 11 major telcos, which represent 46% of global capex, from 2019 to 2023. BT was added in the 2023 update. Table 1 shows the included telcos’ capex and change for 2023.

Table 1: Major telcos’ capex, 2023

Source: Omdia

Of the 11 telcos Omdia analyzed, Comcast, NTT, and China Telecom had notable capex growth (in their respective local currencies). América Móvil’s capex grew notably YoY in US dollars, but this was largely due to exchange rate effects; it decreased slightly in Mexican pesos.

• Comcast, primarily a fixed operator, increased capex by 15% YoY from $10.6bn to $12.2bn. Its connectivity and platforms capex grew by 1.5% to $8.2bn, and its spending increased due to the development of the Epic Universe theme park in Orlando and a $271m acquisition of land related to theme park expansion opportunities. In 2024, Comcast expects capex to continue to be focused on investments in line extensions and increased capacity in scalable infrastructure and theme parks.
• NTT’s FY 2023 capex grew by 4% in US dollars but 11% in Japanese yen as it increased spending on its global solutions business segment, which principally provides systems integration services, network system services, cloud services, global data center services, and related services. NTT also increased spending on real estate, energy, and “others.”
• China Telecom’s capex grew by 7% in Chinese renminbi (2% in US dollars). In 2023, its reported mobile network capex decreased from ¥31.5bn to ¥29.5bn ($4.4bn to $4.2bn at 2023 exchange rates), and its broadband network capex increased from ¥15.5bn to ¥16bn ($2.2bn to $2.3bn at 2023 exchange rates). Meanwhile, China Telecom ramped up capex on industrial digitalization, which includes spending on artificial intelligence (AI) and cloud computing, among other services. In 2024, it expects capex of ¥18bn ($2.5bn at 2023 exchange rates) on cloud/computing power.

Vodafone, Verizon, and DT decreased capex significantly in 2023 compared to 2022.

• Vodafone agreed to the sale of Vodafone Italy and Vodafone Spain in its FY 2024 (nine months overlap the 2023 calendar year), which accounted for much of its capex decrease of 22% ($8.8bn to $6.8bn) and a capital intensity decrease from 18% to 17%. Under the new structure, pre-tax return on capital employed improved from 6.8% to 8.2% in FY 2023 (7.5% in FY 2024). Vodafone expects its country-level capital intensity to be broadly maintained in FY 2025 but notes it will be investing more in Germany.
• Verizon’s capex fell by 19% ($23.1bn to $18.8bn), largely due to the conclusion of its C-band deployment, which was discussed earlier.
• DT’s capex was down by 19% YoY ($22.1bn to $17.9bn), also primarily due to reduced capex for network rollouts in the US. In addition, DT’s capex on the cloud decreased. In its Germany segment, capex was up approximately $0.2bn because of increased spending on fiber optic buildout, but this was dwarfed by the decrease from the US segment. DT expects its capex to decline to around €15.9bn ($17.1bn using 2023 exchange rates) in 2024.

Appendix

Further reading

Global Telecoms Capex Tracker – 2023 (July 2024)

Author

Adam Mackenzie, Senior Analyst, Service Provider Network Evolution

[email protected]