Mobile operators are spending three times more on Opex than on capital expenditure

Keeping a focus on operating costs was somewhat neglected during the early days of mobile telephony. The drive to deploy networks and gain subscribers was considered paramount, and operators decided that sorting out the growing operating costs associated with these two business objectives could wait for another day. That day has come.

An increasing number of mobile operators are facing a harsh new truth: their markets have reached maturity with little further opportunity for real subscriber growth.Their concerns have shifted from growing revenues to making sure that the revenues they do receive are as profitable as they can be. And these concerns are exacerbated for European operators by increasing EU tariff regulation.

Many are hoping that the decline in voice revenues is hopefully balanced by the uptake of data services. But the reality for most is that they have failed to attract large-scale subscriber interest to non-voice services, with the exception of text messaging.

This predicament has provoked the more established mobile operators into a harsh examination of the ongoing costs, or operating expenditure (Opex), of every aspect of their businesses. An example of this examination can be shown in the following slide:

According to the market analysis firm Pyramid Research, mobile operators are today spending three times more on Opex than on capital expenditure (Capex), or a total of US$400 billion to US$500 billion annually. The magnitude of this Opex figure needs to be considered alongside the fact that operators are presently involved in a dramatic transformation that will involve Capex investment to provide additional high-speed capacity, convergence and a network evolution towards next-generation networks (NGNs).