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Telecom spending on the rise

Spending on telecommunications services is likely to go beyond the $1 trillion mark in 2004, IDC says. But telecom gear makers still face challenges.

Spending on telecommunications services in 2004 is likely to go beyond the $1 trillion mark for the first time, according to market research firm IDC.

Spending on telecom gear, meanwhile, will rise to more than $52 billion, as the overall market begins to rebound after several sluggish years, IDC said Monday.

In total, worldwide spending on telecommunications this year will be 4.4 percent higher than 2003, and the industry will see a compound annual growth rate of 4.7 percent through 2007, the market researcher said in the latest issue of its Worldwide Telecommunication Black Book.

The growth will be driven in large part by adoption of broadband Internet services and virtual private networks based on Internet Protocol. Revenue from these data services will jump by 16 percent in 2004 from the preceding year, making up one-quarter of the total market. Overall, data services are projected to grow at a 15 percent compound annual growth rate globally to reach $375 billion by 2007. The growth rate for wireless data services will be 30 percent, and by 2007 spending in that area will reach $150 billion, IDC said.

Traditional voice services are expected to hold their own for some time, even as data's slice of the pie grows.

"The voice market will continue to be a key part of the industry and will generate more than two-thirds of the industry's revenue throughout the forecast period," Rena Bhattacharyya, program manager for worldwide telecom markets at IDC, said in a statement.

Spending on telecom gear will jump 6 percent this year compared with 2003 and will grow steadily at an 8.9 percent compound annual growth rate through 2007, with North America accounting for half of the market. The equipment sector, despite its growth, will continue to be a "challenging place," IDC said.