Global Telecoms Capex Trends – 2022

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Summary

Omdia recently published the 2022 full-year update of its Global Telecoms Capex Tracker (see Further reading), a detailed database of telecom operator capital expenditure (capex) from 1Q19 to 4Q22. This Analyst Opinion covers the major recent developments in telecoms capex and highlights some interesting points from the tracker.

In the tracker, Omdia splits capex estimates into various categories and subcategories (see Figure 1) that broadly map to our technology market research coverage. For the full year of 2022, the first level of breakdown is into civil infrastructure (9%), access network (37%), transport (14%), core (4%), cloud infrastructure (9%), IT and software (13%), devices and customer premises equipment (CPE) (6%), and other (10%).

Source: Omdia

IT and software’s share of global capex grew in 2022

Global telecoms capital expenditure growth slowed to only 0.5% in 2022 after an increase of 6% in 2021. Capex grew by 3% in 1H22 but declined by 2% year over year (YoY) in 2H22. Global telecoms revenue decreased by 3% in 2022; consequently, capital intensity (capex divided by sales) grew to 17.5% from 16.8% in 2021.

IT and software increased to 13% of global telecoms capex, and cloud infrastructure increased to 9% in 2022, up from 12% and 8%, respectively, in 2021.

NTT and DT spent relatively heavily on IT and software in 2022, accounting for around 17% of both operators’ total capex compared to the industry average of 13%.

China Telecom is also investing heavily in IT, and its cloud revenue increased by 108% in 2022. This growth looks set to continue in 2023 as the company plans to increase its “industrial digitalization” capex by 40% from CNY27bn in 2022 to CNY38bn ($3.9bn to $5.5bn). Industrial digitalization refers to cloud, big data, AI, digital platforms, and security services, among others.

China Telecom predicts its mobile network, broadband network, and operating systems and infrastructure capex will decrease in 2023 but forecasts that its total capex will increase by approximately 7% to reach CNY99bn ($14.4bn) in 2023. China Telecom’s revenue from industrial digitalization grew to CNY118bn ($17.2bn) in 2022, almost as large as revenue from the wireline and smart family service.

AT&T, Comcast, and Verizon had the highest capex growth in 2022

The tracker enables spending comparisons for each of the top 10 CSPs by revenue (and the industry overall) from 1Q19 to 4Q22.

Among the 10 CSPs we analyzed, AT&T, Comcast, and Verizon had the highest capex growth in 2022 (in US dollars). Deutsche Telekom had the highest capex growth when measured in local currency units (LCU).

• AT&T’s capex grew despite its disposal of WarnerMedia in April 2022. AT&T reported its highest-ever capex in 2022, which it attributed to rolling out 5G and investing in fiber across the US. AT&T expects a similar capex level in 2023.
• Comcast's capex grew 16% in 2022, with connectivity and platforms capex up 3% and content and experiences spending up 112%. In 2023, Comcast expects capital intensity in its US cable business to stay at a similar level to 2022 (11% of revenue) as the company aims to accelerate its homes passed growth to about 1 million and continue to transition its entire broadband network to DOCSIS 4.0 over the next few years.
• Verizon reported that its “business as usual” capex declined by $1.3bn in 2022. However, total capex increased due to C-band spectrum buildout. The company previously announced plans to spend an incremental $10bn on C-band-related capex from 2021 to 2023 and had spent $8.2bn of this by the end of 2022. Verizon expects capex to fall once the C-band buildout is complete. CEO Hans Vestberg provided guidance for capex of “around $17 billion” in 2024 (versus $23bn in 2022), representing the company’s “lowest capital intensity in over a decade.” Verizon claims approximately 50% of its sites are served by its own fiber, which the company believes is above competitors’ levels, giving it a capital-efficient path to future cash flow generation by leveraging the same infrastructure for its fixed and wireless services.
• DT’s capex increased by 17% (measured in euros), largely due to T-Mobile’s 5G network buildout in the US, the integration of Sprint, and exchange rate effects. DT’s capex also increased in its Germany segment due to fiber-optic and 5G buildout. T-Mobile’s CFO, Peter Osvaldik, stated that the company’s capex will decline approximately 30% in 2023 as DT reaches its network coverage targets.

NTT, Vodafone, and Softbank had the lowest capex growth in 2022 in US dollar terms, partly due to the appreciation of the Japanese yen and euro relative to the dollar over 2022.

• NTT’s capex fell by 6% (LCU) in 2022 as the company is in the process of a successful cost reduction program, which it began in 2018.
• SoftBank’s capex grew by 13% (LCU) in 2022 after significant spending in the fourth quarter compared to previous years. It expects capex to fall “significantly” after 1Q23 as its investment in 5G completes its cycle.
• Vodafone’s fiscal year ends in March, and the company has not yet reported results. However, for the six months ending September 2022, Vodafone’s reported capex grew 5% YoY due to higher spending on its network and 5G rollout and investment in new products and digital services.

Appendix

Further reading

Global Telecoms Capex Tracker ‒ Full Year 2022 (April 2023)

“Introduction to the Global Telecoms Capex Tracker” (February 2023)

Author

Adam Mackenzie, Senior Analyst, Service Provider Network Evolution

[email protected]