Telecom companies decrease allocations for 5G and broadband expansion in 2024
Telecom operators are slashing their investments in 5G and fixed broadband, according to a report by Dell'Oro Group. The rough conditions that marked the latter half of 2023 spilled over into the first half of 2024, causing a 10% drop in worldwide telecom capital expenditure (capex) year-over-year (YoY) in the first half of 2024. This decline is due in part to inventory buildup, weaker demand in China, India, and the US, tough 5G comparisons, excess capacity, and heightened uncertainty.
In a nutshell, the revenue trajectory's leveling off and the challenges faced in monetizing new technologies and opportunities are shrinking operator risk appetite and discouraging extended capital investment intensity levels, explains Stefan Pongratz, vice president for RAN and telecom Capex research at Dell'Oro Group. The lessened gap between advanced and less advanced regions in adopting new technologies is also influencing investment intensity.
Key findings from Dell'Oro Group's September 2024 Telecom Capex report include:
- Global carrier revenues are expected to augment at a mere 1% compound annual growth rate (CAGR) over the next three years.
- Worldwide telecom capex is estimated to contract at a mid-single-digit rate in 2024 and at a negative 2% CAGR by 2026.
- The ratio of wireless to wireline remains constant, signaling rough times ahead for wireless. Wireless-related capex will dwindle by 3% CAGR by 2026.
- Capital intensity ratios are modeled to hit 15% by 2026, down from 17% in 2023.
Now, let's delve deeper into the context:
Insights into 5G Technology
The surging interest in 5G is evident in the Open RAN market, where Dell'Oro anticipates that sales could soar to $10 billion by 2025, representing over 10% of the overall RAN market. This growth is fueled by increased adoption across multiple regions, indicating robust momentum. The 5G core network market is betting on a 15% year-over-year growth in 2025, underpinned by the growth of 5G networks and the migration from older network technologies like 3G.
A Spotlight on Fixed Broadband Technology
Though broadband access equipment revenue dipped in early 2025 due to slow market conditions in China, the outlook remains positive for further investments, especially in fiber technologies. Dell'Oro Group underlines the aggressive fiber expansion plans of service providers in North America and EMEA, backed by increased OLT port purchases. The growth in fixed broadband is being driven by the expansion of fiber networks by major operators like AT&T, which have reported impressive fiber deployment milestones and growth in subscriber numbers, underscoring the appeal of fiber investments.
Contributing factors for this trend include the push for fiber deployment, the growth of 5G, market uncertainty, and technological advancements such as Open RAN and DOCSIS 4.0.
- Despite the decline in worldwide telecom capital expenditure, the Open RAN market, fueled by the surging interest in 5G, is predicted to grow, with sales potentially reaching $10 billion by 2025.
- Contrary to the reduction in investments in 5G and fixed broadband, the aggressive fiber expansion plans of service providers like AT&T, combined with the growth of 5G and technological advancements, have created an appealing environment for further investments in fiber technologies.
