If you thought this year was bad, wait until 2002.
Service provider capital expenditures in the U.S. are expected to drop 16 percent next year from 2001 levels, according to investment firm UBS Warburg LLC, which recently met with some of the country's major carriers.
Three such carriers - AT&T Corp. , Verizon Communications Inc. and BellSouth Corp. - provided some sobering insight into their 2002 spending plans. AT&T`s spending will fall more than 20 percent from 2001 levels, while Verizon and BellSouth stated that their capex next year will be flat to down slightly, UBS reported.
AT&T's guidance represents only the "core" business and not the wireless or cable assets, Warburg states in a recent report. And the capex reduction is double the 10 percent Warburg previously anticipated.
AT&T's disclosure follows a 26 percent reduction in year-over-year capex by WorldCom and a 35 percent cutback by Qwest. Warburg expects Sprint to follow suit.
The regional Bell operating companies won't cut spending as dramatically. Warburg expects a year-over-year decline of 5 percent in 2002 from this camp. And while Verizon and BellSouth will be flat to slightly down, SBC is expected to cut spending by 5 percent to 10 percent next year, according to Warburg.
RBOCs and the "Big 3" IXCs accounted for 62 percent of the total U.S. capex in 2001. Warburg expects this percentage to increase to 64 percent as smaller carriers, including the competitive local exchange carriers, curtail spending or go out of business.
U.S. capex will total US$98.7 billion this year, down 10 percent from 2000, Warburg predicts. A 16 percent drop next year means carriers will spend $82.6 billion.