A second consecutive year of growth in telecommunications equipment spending may be disrupted by massive operator consolidation in Europe, say analysts
Industry analysts have revealed they expect worldwide spending on mobile and fixed telecommunications networking equipment to rise for a second consecutive year, although growth may be disrupted by large-scale consolidation plans, including BT’s proposed acquisition of EE.
Gartner said it expects telecommunications operators’ spending on mobile infrastructure to grow 8 percent this year, rising to $43.36 billion (£29bn), while it sees fixed network spending rising 7.7 percent to $10.33bn, driven by rollouts of fibre-optic broadband networks.
Infrastructure spending growth
Growth would be welcome news for the European economy, which is home to both the leading mobile equipment maker Ericsson as well as the number three, Nokia, with the second-largest being China’s Huawei.
Gartner told Reuters that it expects growth to be in part driven by telecommunications companies in developing countries as they launch investments in advanced services such as 4G networks, which are already established in markets including the US, Japan and Korea.
Bernstein Research said it expects wireless equipment spending to rise 5 percent, with fixed network sales remaining mostly flat.
European investment projects including Vodafone’s £7bn network upgrade are expected to help drive growth, analysts said. This push could force Vodafone’s competitors in markets including Germany and Spain to increase capital spending in order to remain competitive, Vodafone has said.
However, major European mergers and acquisitions on the way this year could disrupt the spending picture, since such deals often cause operators to review their contracts with equipment makers, according to analysts.
BT Group has said it is in talks to buy leading mobile operator EE for £12.5bn, while Hutchison Whampoa, operator of the Three network, plans to acquire Telefonica’s O2 for up to £10.25bn, and Altice is acquiring Portugal Telecom.
Hutchison Whampoa is reportedly planning to use the regulatory review of its O2 acquisition as an opportunity to push for a competition review of the UK telecommunications industry, in a move that could push back BT’s EE deal by several months.
Analysts have said that the mergers are, however, likely to receive approval, since similar arrangements have passed regulatory scrutiny in other European markets.
“Consolidation is being encouraged and similar deals have been approved in Ireland and Germany,” said Matthew Howett, principal analyst for regulation at Ovum.
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