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Despite Downturn, Global Telecom Capex, Revenue Up for 2011

The economy may not have bounced back in 2011, but telecom spending and growth fared well, driven by strong demand for mobile broadband services, apps and devices, according to research firm Infonetics.

Global Telecom Carrier Capex

350 300 250 200 150 100 50 0

Capex:Revenue Capex 2011 2012 2013 2014 2015 © Infonetics Research, Service Provider Capex, Opex, ARPU, and Subscribers, Nov. 2011 As part of its Service Provider Capex, Opex, ARPU and

Subscribers report, Infonetics said it expected an increase in global telecom CapEx of 6% to $311 billion in 2011 versus 2010, with global industry revenue increasing 8% to $1.86 trillion. Infonetics principal analyst Stéphane Téral cited several

key activities as driving the spending growth, including AT&T’s acceleration of its 4G spend in the U.S. (including ramped up LTE plans, HSPA+ upgrades and WiFi hot spot deployments). Notable regions of high spending include Africa, with new

network deployments across the continent, and Latin America, which is preparing its infrastructure to host the World Cup and the Olympics in coming years. That uptick is balanced out by spending delays in areas hit hard by the global debt crisis, including Greece, Italy and Hungary, as well as relatively stable spending across Asia Pacific (now the single biggest telecom market). Other highlights: • On the revenue side of the equation, telecom service provider revenue is expected to grow 7.6% in 2011, to $1.86 trillion, and to $2.17 trillion by 2015.

• Service-provider spending on every type of next-gen equip- ment is expected to increase in 2011, outside of TDM equipment. The fastest-growing areas are WiMax equipment (27.5%) and video infrastructure (20.7%).

• Spending by pure-play wireless operators—without landline holdings—is expected to grow to account for nearly 33% of all telecom capex spend by 2015. 

4 | TELLABS INSIGHT Q1

20% 15% 10% 5% 0%

IF THE INTERNET WERE A COUNTRY

There’s no doubt that the Internet has had a tremendous impact on the global economy. But it’s obviously difficult to get a handle on just how big of an impact. That didn’t stop McKinsey & Co. from trying

to wrap its arms around the problem in a recent white paper, declaring that the Internet has accounted for 21% of GDP growth in the world’s largest economies over the past 5 years. According to the report—created by the

McKinsey Global Institute and entitled “The Great Transformer: The Impact of the Internet on Economic Growth and Prosperity”—there are more than 2 billion people connected to the Internet participating in e-commerce transactions, totaling more than $8 trillion. For the very largest countries, the Internet

accounts, on average, for 3.4% of their GDP. In total, “Internet GDP” is bigger than the individual country GDPs of Spain or Canada and growing faster than the GDP of Brazil, the report found. In most large countries, the Internet now contributes more to the overall economy than established sectors like mining, utilities, agriculture or education. To make those assessments, McKinsey

limited its analysis to the online economies of the G-8 countries, plus 5: Brazil, China, India, South Korea and Brazil. It included private consumption, private investment, public expenditure and trade in measuring the “Internet economy.” 

If the Internet were a sector, it would have a greater weight in GDP than agriculture or utilities

Sector contribution to GDP, 2009

Real estate

Financial services Health care Construction

Discrete manufacturing Transportation Education

Communication Agriculture Utilities Mining

3.9

3.0 3.0

2.2 2.1

1.7 Internet1 : 3.4

1 Internet share includeds parts of other sectors (e.g., communication). Source: Organisation for Economic Co-operation and Development; McKinsey analysis

6.4 6.3

5.4 5.2

% of total GDP 11.0

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Avg Capex in $US Billions

Avg Capex-to-Revenue Ratio