Despite unabated network usage, global telecom revenue is on track to grow just 1.1% in 2017 over the prior year, while capex is down nearly 2%, says a new report by research firm IHS Markit.
Global economic growth prospects, meanwhile, are looking up. IHS Markit macroeconomic indicators point to moderate global economic growth of 3.2% for 2017, up 2.5% from the previous year, and world real gross domestic product (GDP) is projected to increase 3.2% in 2018 and 3.1% in 2019.
“Although the telecoms sector has been resilient, revenue growth in developed and developing economies has slowed dramatically due to saturation and fierce competition, said Stéphane Téral, eresearch and analysis, mobile infrastructure & carrier economics at IHS Markit.
“At this point, every region is showing revenue growth in the low single digits when not declining, and there is no direct positive correlation between slow economic expansion and anemic telecom revenue growth or decline as seen year after year in Europe, for instance,” said the analyst.
China alone is tamping down global telecom capex in 2017
IHS Markit forecasts that a 1.8% year-over-year decline in global telecom capex in 2017, mainly as a result of a 13% falloff in Chinese telecom capex. Asia Pacific outspends every other region in the world on telecom equipment.
“Call it precision investment, strategically focused investment or tactical investment, but all three of China’s service providers — China Mobile, China Unicom and China Telecom — scaled back their 2017 spending plans, and the end result is another double-digit drop in China’s telecoms capex bucket, with mobile infrastructure hit the hardest,” Téral said. “Bringing down capital intensity to reasonable levels of 15 to 20 percent is the chief goal of these operators.”
The virtualization trend
Despite the spending cutbacks, a transformation is underway in service provider networks, epitomized by software-defined networking (SDN) and network functions virtualization (NFV), which involve the automation of processes such as customer interaction, as well as the addition of more telemetry and analytics with feedback loops into network operations, operations and business support systems, and service assurance.
"Many service providers have deployed new architectural options — including content delivery networks, distributed broadband network gateways, distributed mini data centers in smart central offices, and video optimization," said Michael Howard, executive director of research and analysis for carrier networks at IHS Markit.
“Nearly all operators are madly learning how to use SDN and NFV, and the growing deployments today bring us to declare 2017 as The Year of SDN and NFV,” he added.
Data is the new oil, and AI is the engine
Big data is becoming more manageable, and operators are leveraging subscriber and network intelligence to support the automation and optimization of their networks using SDN, NFV and initial forays into using analytics, including artificial intelligence (AI) and machine learning (ML).
“Forward-thinking operators are experimenting with how to use anonymized subscriber data and analytics to create targeted services and broker this information to third parties such as retailers and internet content providers like Google,” Téral said. “No matter their size, market or current level of digitization, service providers need to rethink their roles in the new age of information and reset the strategies needed to capitalize on this opportunity.”