Chinese Network CAPEX to Peak in 2013

RENO, NV, April 29, 2013

New data from Synergy Research Group and TeleGeography shows that network CAPEX in China will peak in 2013 before gradually tailing off over the following four years. In 2012 total network CAPEX (which excludes spend on buildings and non-network infrastructure) came in at CNY252 billion or US$40 billion, equivalent to 25% of telecoms service revenues. Driven by an expected jump in spend at China Mobile, network CAPEX in 2013 will increase to 27% of service revenues. However, by 2017 this ratio will have fallen to below 20%. In absolute terms, this means that network CAPEX will rise in 2013 to around CNY293 billion (US$46 billion), but will then decline by 1%-2% per year.

China Mobile remains the biggest spender among the three main Chinese operators, though in 2012 China Unicom ran it close due to a big increase in its CAPEX level. In order to drive investment in new LTE infrastructure and to continue aggressive growth in 3G rollout, China Mobile has budgeted for a big jump in CAPEX in 2013. Across all three operators wireless-related CAPEX is expected to remain high during the next five years, while investment in fixed broadband infrastructure will tail off as the big push for wireline network expansion and upgrade slows down.

“We are forecasting that telecoms service revenues in China will grow at a CAGR of 7% from 2012-2017” says John Dinsdale, Synergy Research Group’s Managing Director. “However, once we get beyond 2013 network CAPEX as a percent of revenues will trend downwards towards more normal levels found in well-developed markets. This will present some big challenges for equipment vendors who have based their growth plans around continued expansion in Chinese network spending.”