China telcos’ broadband capital spending to boom through 2014

EL SEGUNDO, USA: Propelled by government support, China’s broadband capital spending is expected to rise by two-thirds from 2010 to 2014, according to new IHS iSuppli research.

Spending on broadband infrastructure equipment by China’s telecommunications operators will soar to $1.15 billion in 2014, up from $925 million this year and $688 million in 2010, as presented the attached figure. By 2015, however, revenues will decline to $1.02 billion as the broadband market for urban Internet users approaches the saturation point.

“Government interest and support for expanding high-speed Internet access in China will drive massive growth in broadband expenditures during the next few years,” said Hailin Zhao, industry analyst for China research at IHS. “This strong broadband expenditure growth is all the more remarkable given that overall communications capital spending in the China will rise only slightly during the coming years. Overall spending is declining in the short term and rising only marginally over the long term because of a slowdown in spending on wireless infrastructure in China.”

Government spending
The 12th Five-Year Plan issued by China’s Ministry of Industry and Information Technology (MIIT) established aggressive development targets for the China telecommunications industry from 2011 to 2015. During this time, China’s mobile communications user base will reach more than 1.1 billion with total Internet users climbing to 600 million, representing a 40 percent penetration rate, IHS iSuppli figures show.

Despite the expansion, overall growth in telecommunications spending in China will slowing during the next four years as the historic expansion and upgrade of mobile networks in the country slows. And although spending reached a peak of $7.9 billion attained in 2009, it is expected to plunge to $4.9 billion in 2011. Given the weakness in wireless, total capital spending for China’s telecommunications carriers during the next three years will rise just slightly, increasing to $5.4 billion by 2014.

Broad expansion for broadband spending
In April 2010, seven Chinese government ministries announced their support for a stimulus plan to build fiber broadband access networks nationwide. Following this proposal, China Telecom immediately commenced its Broadband China, Fiber Cities project aimed at providing households in all cities with populations of 20 million people or more with access to high-bandwidth capability by the end of 2013.

Meanwhile, China Mobile announced an expenditure of $2.2 billion to construct a passive optical network (PON) in cooperation with China Tietong Telecommunications Corp. China Mobile also is aiming to put its smart grid plan into motion and has plans to build 1 million Wi-Fi hot-spots during the next three years.

IHS expects total PON ports to hit 53 million users in China by 2011 and fiber-based broadband subscribers to reach more than 57 million people, including more than 30 million fiber-to-the-home (FTTH) customers.

Over the course of 2011, China Mobile will be testing the time division long-term evolution (TD-LTE) wireless standard on a small scale, with hopes to achieve download speeds of approximately 100 megabits per second. The company plans to activate a commercial network at some point in 2012.

Source: IHS iSuppli, USA.