Telecommunication operators remain the biggest players of the overall network operator space, but webscale operators like Amazon Web Services (AWS), Microsoft, and Alphabet/Google will become increasingly important drivers of the space over the next several years, according to a new report from MTN Consulting.

The report noted that telecom operators accounted for nearly 67% of segment capex over the past five years, but that total will drop to less than 55% over the next five years, and will be less than 50% in 2026.

That yearly spend as a proportion of total telecom operator revenues peaked at 17.3% in 2021, which was in line with peak initial spending for 5G network deployments. The total capex spent will remain at more than $330 billion annually over the next three years before dropping to $326 billion in 2026, which will be 16.2% of yearly revenues.

Telecom operators have already braced the market for a slow return on that 5G investment.

Telecom operator spending on software will account for 20% of that capex figure in 2026, which was a bit slower than MTN had previously forecast. And telecom operator opex spending will grow an average of 4% per year through 2026, when it will be roughly equivalent to capex.

That software investment will include more spending on automation, which will impact employee spending. MTN predicts that the telecom market will cut more than 400,000 jobs over the next five years, but spending on each employee will increase from around $58,000 in 2021, to more than $70,000 in 2026.

Webscale operators will increase their capex from an average of 26.4% over the past five years to more than 37% over the next half-decade. In real numbers, that capex will increase from $175 billion in 2021, to $276 billion in 2026. But a steeper increase in revenues will see the proportion of capex versus revenues drop from 8.2% in 2021 to 7.5% in 2026.

Webscale network and IT capex is set to grow at a faster pace than other segments, accounting for 45% of total capex spend in 2026. Those operators will also increase headcount from around 4.1 million employees at the end of 2021, to around 6.7 million employees in 2026.

The remainder of capex will come from what MTN calls the carrier-neutral segment, which includes data center providers like Equinix and Digital Reality and tower companies like China Tower and Crown Castle. That segment is excepted to account for 8.7% of market capex in 2026.

Carrier-neutral providers are forecast to increase spending on new data center locations and acquiring assets spun out by telecom operators and webscale providers. The segment is also set to increase its employee base from around 120,000 jobs at the end of last year to 152,000 jobs by the end of 2026.

In parsing out that spend, MTN noted that the 13 largest operators accounted for more than 50% of the capex over the past three years, with five of those being webscale operators. More broadly, 50 of the largest operators accounted for more than 80% of total capex over the past three years, with that number including 37 telecom operators, 10 webscale providers, and three carrier-neutral providers.

“These large operators not only make the most attractive customer targets for suppliers; they also have the most impact on technology development in networks, through their own R&D, participation in industry bodies, and work with (and purchasing from) vendors,” the report noted.

MTN did note that geopolitical issues over the past six months has required an update to past guidance. It cited recent adjustments to gross domestic product forecasts by government bodies, more frequent updates from investment banks and rating agencies, and general border instability.

This has resulted in weaker revenue growth outlook for telecom operators, with a specific concern in Europe over the next two years; surging job cuts by telecom operators; and slower revenue growth by webscale providers over the next two years offset by a higher overall level of capex and research and development spend.