Mobile capex on the rise as ARPU flattens in 2010
ABI Research predicts wireless operators will increase their capex in 2010, even as mobile ARPU remains flat
Wireless operators are beginning to step up their investment levels after what has been an economically challenging year, but their subscribers might not be as ready to up their wireless investment as well.
According to ABI Research, mobile capital expenditures (capex) will grow by more than 4% year-on-year in 2010, after contracting by 2.7% in 2009. In a separate report, the research firm found that the mobile end-user average revenue per user (ARPU) will remain flat in North America with mobile data revenues replacing falling voice revenue.
ABI said that mobile ARPU dropped between 6% and 9% globally in the third quarter of 2009 compared to the previous year. The decline varied depending on the geographical region, but voice revenues were hit hardest across the board. Growth in minutes of use peaked in Q3 across the globe, and is expected to grow at a compound annual growth rate (CAGR) of only 1.4% between 2009 and 2015. Much of the growth will be driven by emerging markets like Africa, Asia and the Middle East, leaving the rest of the world to rely much more heavily on data.
To offset these voice declines, mobile operators are pushing mobile Internet services to end subscribers, which has already resulted in more than 17% year-on-year growth in mobile Internet revenues in the US. The growth, which is expected to continue, is good news for wireless operators, but also poses a significant challenge. According to ABI Research analyst Bhavya Khanna, mobile data traffic will expand at a CAGR of 40% from 2009 to 2015, meaning that wireless operators must upgrade their networks or risk being compromised by the onslaught of data.
In the US, network upgrades are well underway. Clearwire and Sprint are busy rolling out WiMax 4G networks, while T-Mobile is focusing on 3.5G technologies, HSPA and HSPA+ upgrades. Verizon, AT&T and MetroPCS are responding to the growth with investments in 4G long-term evolution (LTE) networks.
AT&T, which doesnít plan to move to LTE until 2011, is also focusing much of 2010 on improving its 3G network. The carrier said in its fourth-quarter earnings call that it would spend $18 to $19 billion in capex in 2010, up nearly 10% from 2009 spending levels of $17.3 billion. AT&T has also made clear its intentions to institute usage-based pricing that would charge the heaviest data users more than lighter users. Today, AT&T charges a flat fee for all users, which has caused data costs, along with network congestion, to skyrocket.
Khanna said that service revenues bounced back in 2009, which will help fund all of these operatorsí capex plans in 2010. Overall, US mobile service revenues grew 8.8% between Q3 of 2009 and the year prior. Driven in large part by smartphones, ABI Research expects mobile Internet service revenues to continue to grow at a CAGR of 9.4% between 2009 and 2015.
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