Operators continue to scale back spending on 5G and fixed broadband

The new report claims says the scaling back of investments in 5G and fixed broadband technologies by operators is a result of the 'more challenging' conditions that shaped the second half of 2023 extending into the first half of 2024.

Specifically, the 10% decline in worldwide telecom capex (the sum of wireless and wireline/other telecom carrier investments as Dell’Oro measures it) was blamed on built-up inventory, weaker demand in China, India, and US, ‘challenging 5G comparisons’, excess capacity, and elevated uncertainty.

In terms of outlook, the analyst expects global carrier revenues to increase at a 1% CAGR over the next three years. While this might sound like thin gruel, it’s something – and it is about the only piece of (modest) good news the report highlights.

Worldwide telecom capex is projected to decline at a mid-single-digit rate in 2024 and at a negative 2% CAGR by 2026. The mix between wireless and wireline remains largely unchanged, we’re told, which reflects ‘challenging times still ahead’ for wireless – with wireless-related capex declining at a 3% CAGR by 2026, predicts Dell’Oro.

Meanwhile capital intensity ratios are modelled to approach 15% by 2026, down from 17% in 2023, say Dell’Oro soothsayers.

“The high-level message is clear,” said Stefan Pongratz, Vice President for RAN and Telecom Capex research at Dell’Oro Group. “The flattish revenue trajectory and the difficulties with monetizing new technologies and opportunities are impacting the risk appetite and willingness to raise the capital intensity levels for extended periods. In addition, the reduced gap between advanced and less advanced regions, when it comes to adopting new technologies, is impacting the investment intensity on the way up and down.”

This reflects a previous report Dell’Oro put out last month, which cuts the cake in a slightly different way but tells the same story – telecom equipment revenues fell by 17% worldwide during the first half of the year. Dell’Oro described these as ‘abysmal results’ and again blamed excess inventory, weaker demand in China, ‘challenging 5G comparisons’, and elevated uncertainty.

All in all it is forecasting that global telecom equipment revenues will contract 8 to 10% for 2024.

There is some good news in relation to private networks, however. Another Dell'Oro report published in the same month highlighted that while private wireless RAN revenue growth is tailing off, it remains an expanding market. The analyst predicts that we will see revenues grow at a 21% CAGR over the next five years, which is certainly a rosier picture than what’s being painted for public networks.