The landscape of telecom investments is witnessing a notable decline in 2024, especially in the domains of 5G and fixed broadband technologies. According to recent findings by Dell’Oro Group, global telecom capital expenditure (capex), which includes both wireless and wireline investments, saw a staggering 10% fall year-over-year in the first half of 2024. Several factors contribute to this reduction, ranging from accumulated inventory and reduced demand in key markets like China, India, and the United States, to challenging comparisons in 5G rollouts, surplus capacity, and elevated uncertainties within the sector. This complex array of issues paints a concerning picture for the future of telecom investments.
Stefan Pongratz, Vice President of RAN and Telecom Capex Research at Dell’Oro Group, underscores that flat revenue trends and difficulties in monetizing new technologies are dampening investment appetites. The reduction in global investment intensity is apparent as the technology adoption gap narrows between advanced and less advanced regions. Companies find themselves caught between the need to innovate and the impracticalities of current market and economic conditions. This balancing act is proving to be a significant hurdle, particularly for continuous 5G expansion and advanced broadband deployment. The economic viability of forthcoming projects is heavily scrutinized, reconsidered, or outright shelved.
Projected Financial Impact
The September 2024 report by Dell’Oro Group further delves into specifics, revealing that global carrier revenues are expected to grow at a modest 1% compound annual growth rate (CAGR) over the next three years. However, this comes in stark contrast with the projected decline in worldwide telecom capex, expected to decrease at a mid-single-digit rate in 2024 and at a -2% CAGR by 2026. This contradiction between modest revenue growth and steeper capex decline signals that telecom operators are growing increasingly cautious, possibly prioritizing profitability and operational efficiency over expansion and innovation. The distribution of investments between wireless and wireline remains largely unchanged, but there’s an ongoing struggle to balance these budgets effectively.
Notably, wireless investments are forecasted to decline at a 3% CAGR by 2026, which adds to the challenges already hampering 5G expansion. Capital intensity ratios are also predicted to decrease from 17% in 2023 to 15% by 2026. This could signify a broader trend of pulling back on aggressive investment strategies as companies look to ensure better return on investments. The pressing need to adapt to market realities while maintaining technological advancement remains a tightrope for telecom firms worldwide.
Future Prospects
In 2024, telecom investments are experiencing a significant drop, particularly in the realms of 5G and fixed broadband technologies. Dell’Oro Group reports a notable 10% decrease in global telecom capital expenditure (capex) for wireless and wireline investments in the first half of the year. Factors behind this decline include accumulated inventory, lower demand in key markets like China, India, and the United States, as well as difficulties in 5G rollouts, excess capacity, and high uncertainties within the sector, collectively indicating a troubling future for telecom investments.
Stefan Pongratz, Vice President of RAN and Telecom Capex Research at Dell’Oro Group, highlights that stagnant revenue trends and challenges in monetizing new technologies are reducing investment enthusiasm. The narrowing technology adoption gap between advanced and less advanced regions reveals a drop in global investment intensity. Companies face the dilemma of needing to innovate while dealing with harsh market and economic conditions. This balancing act is a major challenge, especially for continued 5G expansion and advanced broadband deployment, causing many future projects to undergo intense scrutiny, reconsideration, or even cancellation.
