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Increasing Capital Expenditure Problem for Telecoms $T, $VZ, $TEF

A lot of people would choose to see that the model of telecom in Singapore (Singtel, M1, Starhub) is that of a business model that wouldn’t die and would only flourish when the whole of Singapore uses data intensive smartphones like iPhones, iPads and Android phones and tablets.

We raised this issue in the past saying that monetization would have to change in the midst of increasing capital expenditure due to greater use of mobile data.

Today I chanced upon 3 great article from Micheal Mace of Mobile Opportunity discussing on this topic.

I really enjoy Micheal’s articles discussing technology strategies and the execution of tech companies. Any tech company investors, fans of gadgets and business owners should subscribe to his RSS feeds.

This week he discuss on this mobile data capex problem. There are great discussions in the comments section as well. A definitely must read for telecom stocks investors.

An Executive Summary

  •   Because of economics and user psychology, I think we’re headed for a slowdown in the growth of mobile data.  The unlimited, exponential growth forecasts are wrong.  I believe the ultimate mobile data market will be smaller, and much more segmented, than most people expect.
  • Even if I’m wrong about user demand, we’re still headed for a slowdown in growth because the cellular networks can’t grow fast enough to handle all the traffic being forecasted.  This is due to physics and can’t be changed; you could just as easily change the phases of the moon.
  • Many of the proposals to "fix" the problem would probably make it far, far worse.  We could end up with a cellular data network that resembles American cable TV: slow to innovate, dominated by a few players, and subject to intense politics, with users caught in the middle.
  • In the future, cellular data for the majority of users will likely be metered, and the majority of people will need to be enticed into using it.  That creates some excellent unaddressed opportunities for everyone from handset companies to app developers.

The 3 Articles

  • Who Will Pay for Mobile Data? Today’s post talks about the forecasted growth of wireless data, and why I think growth won’t continue the way most people are expecting.  That creates some big challenges for mobile data companies, but also some fantastic opportunities.
  • The Truth about the Wireless Bandwidth “Crisis”. In this part, I will talk about the alternate scenario, in which most people are willing to pay for mobile data and adoption of it continues to accelerate. In this case, the mobile operators will need to invest urgently in increased capacity, and even with that investment I think we’ll eventually run out of cellular bandwidth. 
  • How to Shape the Mobile Data Market. In this part I’ll give my take on what we should do about the situation, and I’ll talk about the opportunities all of this change creates for operators, handset companies, and developer

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