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January 22, 2008  |  Email This Article   |  Print This Article

Investments in WiMAX will top US$30 billion in 2008

LONDON (WiMAX Day). The up-start technology known as WiMAX found itself on most of the “top ten” technology watch lists for 2008. All eyes are focussed on the abruptive technology that became an IMT standard last year, shaking the telecommunications industry from its slumber.

The next twelve months will be crucial for WiMAX. Major networks are poised for launch; new base stations, modems and handheld devices will be shipped; and millions of chipsets will make their way through the stepping, etching, cleaning, doping and dicing machines in fabs around the world.

With this frenzy of activity, investment will be the key ingredient that keeps the industry on course. WiMAX Day estimates that the total capital to be invested in WiMAX networks and technology will be more than US$30 billion over the next year. This is equivalent to the capex of the global GSM industry some ten years ago, when it was roughly the same age as WiMAX.

Nearly half of this amount will be consumed in the deployment of new networks. According to documents recently filed by twenty publicly-listed telecoms companies, US$9.2 billion has been allocated to build WiMAX networks around the world.

This figure does not include investments from Sprint Nextel, as the company has not released its Q4 report, nor provided guidance on its investments for 2008. However, investment bank UBS noted in a recent report that for 2008, “Sprint Nextel has stated that WiMAX spending will be its priority.”

The figure also does not include the KDDI-Intel venture in Japan, which Unstrung reported last week “is closing in on its vendor choices for a US$1.3 billion mobile WiMAX network.”

In addition to internal investment, the WiMAX industry will expend significant capital through mergers and acquisitions, as the industry begins to consolidate, and further investments will be made by VC and private equity funds, both for follow-on rounds and new equity purchases.

Total VC/PE investments for WiMAX in 2008 should double the US$2.073 billion invested in 2007. Likewise, M&A activity in the WiMAX industry during 2007 reached US$1.13 billion, and that amount is expected to more than triple for 2008.

According to Peter Elliott, a partner at PA Consulting Group, “Whilst much of 2007 was about the coming of WiMAX, we believe 2008 will be the year of delivering WiMAX. We expect to see a significant increase in investment activity in the WiMAX sector this year, from the financial and operator communities.”

The next twelve months will also bear witness to an unprecedented amount of radio spectrum auctioned worldwide for use with WiMAX. The capital that will be invested worldwide in 2008 solely to acquire WiMAX spectrum could reach more than US$15 billion, and many of the companies that acquire spectrum also may begin to invest in network infrastructure this year.

“With all the spectrum up for grabs, we think 20 to 30 new WiMAX networks can pop up in the next year,” said an analyst at Deutsche Bank in New York. “There’s no average size for investment, but some of these can enter the hundreds of millions [of dollars] to billions, gauging from recent RFPs issued to vendors.”

WiMAX Day will release its report on WiMAX industry investments and strategies later this year.