Network operator capex to hit $591B in 2025

This commentary explains the network spending forecast update issued in August 2021, comparing it to the forecast published in December 2020 (“Network operator capex to hit $520B in 2025”). This forecast revision is modest: market dynamics are largely as we predicted in December 2020, and most projections are on track. However, some changes have occurred.

• Webscale continues to grow rapidly and record high profits. Webscalers are getting a boost from the lingering of COVID-19, with work and study from home becoming a long-term reality in many markets. Key cloud players are boosting capex outlook due to data center expansion, and also spending more rapidly on non-tech avenues like logistics and fulfillment. (See “Webscale Network Operators: 1Q21 Market Review”).
• There is strong private equity interest in the carrier-neutral sector, with a focus on data centers. We discuss this in our July 2021 report, “Tomorrow’s carrier-neutral operators to integrate tower, fiber and data center assets.” The increased PE interest in carrier-neutral models is enticing more telco asset spinoffs, including at Telefonica, Telstra, Singtel, PCCW, Indosat Ooredoo, PLDT, and Optus (some deals still under discussion).
• MTN Consulting has significantly expanded its coverage of software capex in the telco sector. Over the last 8 months, we have increased our sample size from 24 telcos to 63, and recalculated capex historically for all these providers. The result is twofold: one, a change in historic telco capex estimates (down for 2011-15, up for 2016-19); two, an improved estimate of software’s share of total capex in the telco sector. The trend in this metric is still positive, but at a more moderate clip.
• MTN Consulting has tweaked the Network/IT vs. All other capex splits for most key webscalers. The result is to decrease the Network/IT percentage of total. Both Network/IT and All other capex projections are up in this new forecast, but All other’s 2025 total is up by 35% while Network/IT is up by a more modest 15%. As webscalers use their cash and brands to expand, the tech spend piece gets a bit smaller as a share of total.

The 12/20 forecast called for total capex to climb from $425B in 2020 to $520B in 2025. The new forecast starts from a higher baseline, $457B in 2020, and grows to $591B in 2025. Webscale capex is slightly more important, accounting for 42% of 2025 capex from 39% in 2025 under the last forecast.

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This product contains two files: a qualitative analytic report, and a detailed Excel file containing market size and spending estimates from 2011 through 2025 for the telecommunications, webscale, and carrier-neutral network operator segments.