I like to look at capital intensity, defined as the amount of capital per dollar of revenue. It is interesting to see that the wireline industry is investing twice as much, per dollar of revenue, as the wireless industry.
In 2002 and 2003, wireless revenues were in line with the industry at large: roughly a quarter of total wireless revenues and their capital spending was roughly a quarter of total industry investment. But in 2004 and 2005, the wireline business spent almost 20 cents out of each dollar of revenue in capital, while the wireless industry dropped to a low of 10 cents.
There are some fundamentals at play in both sectors. It is interesting to see that the wireless sector is able to grow revenues with declining capital, while the wireline side must fight just to minimize revenue erosion and increase investment at the same time.
