- Global telco operators are shifting from peak 5G investments to a more disciplined capital allocation, with a growing focus on free cash flow generation and dividend payouts
- Telcos are reallocating capex toward fiber, fixed wireless access, edge computing, and AI-related infrastructure to support future growth, especially in enterprise and cloud services
- 1Q25 results were in line, indicating earnings stabilisation, with operators guiding for strong core profit growth on cost cuts and digital gains
- Dividend payouts are rising with Europe and US telcos maintaining 55-60%, while China and Singapore target 70-80%, reflecting a shift toward investor-focused governance
Related Insights
Global telco capex shifts from 5G buildout to strategic reallocation. In China, major telco operators are scaling back on capex, guiding for an 8-9% reduction in FY25F, after years of heavy 5G investments. This pivot underscores a growing focus towards shareholder returns, with greater emphasis on dividend payouts and capital discipline.
Similarly in the US, capex is also moderating after the peak 5G buildout, with FY24 investments totaling USD80.5bn (down 15% y/y from USD94.7bn in FY23). US telcos are shifting focus to fiber deployments, fixed wireless access, and edge computing to support AI and IoT applications. Capital intensity has fallen to c.15.9% (vs 17.5% in FY23), indicating a prioritisation of monetisation and operational efficiency.
In the broader Asia-Pacific region, 5G rollout has largely plateaued, with capex intensity expected to decline to 19–21% by FY25F–26F. In contrast, Europe telcos’ capex is not expected to see a material decline in FY25, but points towards stabilisation or a modest increase, broadly in line with revenue growth. Post-5G buildout, telcos will emphasise on capex discipline, focus on digital infrastructure, and invest heavily in cloud, data centres, and AI.
Telcos are offering tiered 5G pricing as the market enters maturity. Telcos with standalone 5G networks are enabling premium pricing via network slicing and low latency, to support experience-based monetisation.
1Q25 marks a turning point for Global telcos, with in-line results indicating stabilisation after years of underperformance. Earnings across the sector were in-line with expectations as 5G capex pressure eased, with improved guidance driven by cost cuts, digital growth, and early enterprise recovery. In terms of guidance, Singtel guides for high-single-digit FY26F (March YE) core EBIT growth driven by SGD200mn cost savings. China Mobile guides for c.8% lower FY25 capex, even when cloud and LLM spend rose by c.7% y/y to support digital growth. Meanwhile, Deutsche Telekom (DT) raised its FY25F EBITDA after leases (AL) by EUR100mn to EUR45bn, supported by T-Mobile US’s recent acquisition of Lumos (Fibre Internet provider), Vistar Media, and Blis Media (Ad-tech companies). These deals helped to amplify solid customer growth, partly setting off the existing churn in mobile services. Verizon reiterated FY25F guidance with EBITDA up by 2.8% y/y and EPS up by 3% y/y, in line with the consensus.
We favour telcos demonstrating at least single-digit core growth, high payout ratios, and exposure to cloud and AI-led transformation. Most are guiding for low- to mid-single digit core growth for core businesses. While North American telcos focus on wireless and fixed access, with limited digital expansion, Asian peers in contrast are investing in enterprise 5G, ICT, and data centres to drive earnings. In Europe, DT continues to lift earnings through subscriber growth, broadband, and AI-led enterprise services. However, dividend payout policies vary, with the European and US telcos maintaining 55–60% ratios, while Chinese and Singaporean operators commit to 70–80%, with upside potential.
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