Where's U.S. carrier capex? Overseas

One of the most common trends among telecom network operators as they reported fourth-quarter earnings recently had to do with capital spending figures and the direction in which they are heading: Down. The two largest telcos in the U.S., AT&T and Verizon, forecasted lower capex for this year after they both spent less in the second half of 2008 than they did in the first half of last year. Qwest Communications did not predict lower spending for this year, but already had tightened spending as part of broader cost-cutting.

Several international telcos are in the same boat, with many of the big names saying they will spend less this year on network projects. It was strange then to see AT&T come out this morning with a pledge to invest about $1 billion in its international networks this year.

Is AT&T clarifying its earlier capex stance? The company earlier said its 2009 capex would be about 10 percent to 15 percent lower than last year, and AT&T's native markets are sure to see lower network spending. However, even with the forecast cut, the telco still will spend around $18 billion this year, and it is beginning to tell us where some of that money will go. It sounds like at least $1 billion of that will go toward the international markets where AT&T, Verizon and other U.S. carriers see great potential to expand, and that is no great surprise.

AT&T spent--or at least intended to spend--about $1 billion internationally last year. Both AT&T and Verizon were busy internationally in 2008, particularly in Asia and on projects supporting the build-out of undersea fiber cables, and we can expect more of the same in 2009. But, Light Reading also notes that more money this year could be spent on applications, rather than network infrastructure.

AT&T's international spending pledge should not come as a surprise to network equipment vendors looking to do business with these telcos. The small handful of truly global vendor giants are naturally well-positioned to gain, but for the rest of the vendor crowd, the writing has been on the wall for more than a year: Anyone suffering from a consolidated U.S. network operator market--and now a spending-challenged one--must be ready to follow the money.

While international spending is not necessarily growing, it does not really appear to be shrinking either. Some of the vendors particularly focused on applications, service delivery, app performance and some of the other non-infrastructure areas in which AT&T may spend its money, tend to be smaller vendors. If they have not clarified their international market strategies yet, now would be a good time.

-Dan

For more:
- Light Reading Europe has this report

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