Wireless providers continue capex spending with more on way, survey finds

Cnadian wireless providers are increasing their capital expenditures, even though the amounts they spend are a tiny percentage of the industry outlay. A new study by IDC Canada suggests the outlook for telecom spending in this country is better than that of the United States. The report, Capital Spending Caps: Telecom Capital Expenditure Trends and Outlook 1997-2002, maintains "it is premature to point to an industry-wide capital expenditure (capex) slump in the Canadian sector in either 2000 or 2001." The budgets are unlikely to peak until 2002, analyst Lawrence Surtees writes. CANADIAN WIRELESS CAPEX GROWTH ($M)199719981999%98-992000E%00-992001%01-00Clearnet561.8282372.532%4007%NPMicrocell220.4202.5133.6-34%280110%37534%Rogers AT&T604.7301.0400.933%60050%6000%Total1366.9785.890715%128041%Source: IDC Canada, December 2000*Excludes wireless units of incumbent telcos Surtees looked at 17 publicly traded telecom companies representing wireless, wireline and service providers. The wireless companies surveyed were Clearnet Communications (now part of Telus, (RoW, Sept. 5/00), Microcell Telecommunications and Rogers Wireless. Subsidiaries of larger telcos, such as Bell Mobility and Telus Mobility, were included in their parent companies’ figures. The IDC survey found that spending by the three wireless firms has dipped from $1.3 billion in 1997 to $785 million a year later. The total has slowly inched back up, so that estimated spending for last year was $1.2 billion (see table). That is still a fraction of the $31 billion spent throughout the industry. That includes companies such as Bell Canada, Teleglobe and 360networks Inc. The report says three major initiatives account for capex spending throughout the continent: the development of 3G wireless data networks, expansion of fibre-optic broadband networks and the rollout of high-speed xDSL services. As wireless companies continue the rollout of PCS coverage, they must now also prepare for the launch of 3G data networks. The federal spectrum auction, which began last week, and other 3G projects will involve expenditures well beyond 2003. "Compared to the keen attention and excitement garnered by the wireless telecom segment, Canada’s three national wireless service providers spent a disproportionately small amount on their capex in 2000," Surtees writes. "The three biggest players—Clearnet Communications, Microcell Telecommunications and Rogers AT&T Wireless—combined spent C$1.3B in 2000." That amount, which makes up nine per cent of industry spending, is only a tiny bit higher than what the two largest IXC companies laid out. Bell Canada is the largest telco capex spender in the country. Most of its money is spent on rolling out DSL service. But it still invested more than $500 million in 2000 to expand Bell Mobility’s wireless network in western Canada, thus competing with Telus. IDC predicts that figure will grow if the telecom giant wins 3G spectrum. Telus Mobility spent $150 million last year in capex. But Surtees expects that figure will balloon now that the western telco has taken over Clearnet and QuébecTel. The global telecom market is in trouble, IDC notes. In the U.S., AT&T, WorldCom, Sprint and Verizon have all missed profit targets for last year. Internationally, firms like Telefoncia, BT and Deutsche Telekom have reorganized into smaller structures. "Yet as gloomy as those indicators are, telecom service providers are caught in a Catch-22: they must continue to invest in new network technologies—particularly wireless and optical—if they are to grow revenue and compete," the study reports.

Wireless providers continue capex spending with more on way, survey finds

News | 01/22/2001 5:00 am EST

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