The Nature of Telecom Capex until the End of Decade
This new free report explores the nature and development of telecom capital expenditures (Capex) in Western Europe until the end of the decade.
It begins by outlining Capex’s cyclical nature, influenced by technological advancements like 5G and fiber, consolidation activities, and shifts in data demand growth. Kim K. Larsen, the author, argues against the idea of a permanent decline in Capex, stressing the factors that will continue to demand investment, such as in-market consolidations, some remaining bigger markets fiber deployment, extending the European Union policy on removing high-risk suppliers to all telecommunications infrastructure (from its current 5G focus), and a much stronger push for high-risk supplier replacement needs in markets that have not timely adhered to the European Commission recommendations encouraged by renewed aggressive lobbying from the new Trump administration from 2025.
The report also addresses data growth, noting that while data demand slows, new Capex will still be essential to modernize and expand network capacity. The “overproduction of bandwidth” concept is discussed, arguing that Capex will likely reduce temporarily after the current infrastructure needs are met, but future cycles will necessitate additional investments. The article includes reflections and critique on some of the currently hottest debated topics in Telecom and their possible impact on the Capex development until the end of the decade, such as:
- The end to data growth.
- The end to pursuing speed for the sake of more speed.
- The end to high-risk suppliers in critical infrastructure.
- The end to (history of) Telecom.
Additionally, it critiques the telecom industry’s tendency to overinvest based on “naive expectations” of constant data growth when realistic projections may suggest slower, self-limiting dynamics. Present data growth is slowing down in many markets in Europe, as should be expected when no new uses are significant enough to feed the growth. Irrespective, we should continue to expect substantial absolute growth towards the end of the decade, and it may be somewhat reasonable if new use cases result in a new growth cycle, increasing the growth rate again (as we have seen in the past).
Finally, the report examines how Capex influences financial statements and metrics in Telecom, detailing the shift from Capex to Opex through trends like tower spin-offs and cloud migrations. It warns that financial optimization strategies should not obfuscate operational requirements and highlights the importance of balancing Capex with corporate financial health and shareholder returns. This comprehensive review concludes with reflections on future demands up to 2030, suggesting a balanced but cautious approach to Telecom Capex in response to evolving industry dynamics.