According to a recently published report from Dell’Oro Group, preliminary readings suggest that worldwide telecom capex—the sum of wireless and wireline telecom carrier investments—increased at a low-single digit rate year-over-year in nominal USD terms in 2022, down from the high-single digit growth in 2021. This moderation in the capex growth rate was consistent with the aggregate telco equipment trends previously communicated regarding the six Dell’Oro telecom programs (broadband access, microwave transmission and mobile backhaul, optical transport, mobile core network, radio access network, and service provider routers and switch).

“The relation between service provider capex and telecom equipment is not perfect, partly because the equipment makes up roughly one third of the capex,” said Stefan Pongratz, vice president and analyst with Dell’Oro Group. “Even with the inherent wiggle room, aggregate R-squared for capex and equipment is in the 0.8+ range over the past seven years, so it is obviously an important metric to consider for short-term projections. At the same time, it is not the only input and with the equipment market expected to grow 1% in 2023 and telco capex projected to decline, it can be inferred that the Dell’Oro analyst team is modeling some minor decoupling over the short-term,” continued Pongratz.

Additional highlights from the March 2023 3-year Telecom Capex forecast report:

  • Looking back at the full year, total capex growth was slightly lower than the 3% increase we initially projected a year ago going into 2022, partly due to the stronger USD
  • Global telecom capex projections have been revised upward to reflect the price of the USD and the improved capex outlook in China
  • Global telecom capex is projected to decline at a 2 to 3% CAGR over the next three years, as positive growth in India will not be enough to offset sharp capex cuts in North America
  • Capital intensity ratios are projected to improve and approach 16% by 2025, hinging crucially on the assumption that carrier revenues will remain flat and outperform capex.