Communications is now the fastest growing FDI sector, according to The fDi Report, an annual report on crossborder greenfield investment from fDi Intelligence, with the boom showing no signs of abating. In 2013, fDi Markets – an investment tracker service that is part of the fDi Intelligence portfolio along with fDi Magazine – recorded 762 investments in the communications sector, with capital expenditure totalling $61.59bn. This represents an increase of 82.2% on 2012, and the highest capital investment figure recorded in the communications sector since fDi Markets began measuring such data in 2003.
In a change from its previous format, The fDi Report 2014 focuses for the first time on the capital investment announced by foreign investors rather than the number of FDI projects. A focus on capital investment provides a strong indicator of how foreign investors are responding to the nascent world economic recovery.
The headline finding of the report is that greenfield FDI started to recover in 2013, with a 10.94% growth in FDI from $557.58bn in 2012 to $618.62bn.
While voice and data communications connectivity was once the highest requirement of telecommunications companies, today the demand for cloud storage and data back-up has brought another huge pool of consumers to the market, according to a communications review by consultancy PwC. Communications providers are rushing to get the infrastructure in place to support this growing demand and companies such as online retailer Amazon and consumer electronics company Apple are well placed to take advantage of the trend and are investing heavily.
The sector was a big winner in terms of project numbers, too. Globally, there was a decline of 6.34% in FDI project numbers. However, this trend was bucked by the communications sector, which experienced a rise of 12.2%.
Wired into growth
Of the top 10 sub-sectors in the communications sector, eight experienced growth in 2013, the exceptions to this being the navigational instruments, and radio and TV broadcasting sub-sectors. The top three sub-sectors were wireless telecommunications, data processing and hosting, and wired telecommunications, each of which saw strong growth in 2013. When combined, FDI in the top three sub-sectors totalled $50bn and accounted for 81% of FDI in the sector and 8% of total global FDI.
Wireless telecommunications experienced a 134.81% increase in capital expenditure to $20.88bn in 2013, and a 62% rise in project numbers to 197. As smartphones become standard issue, high-speed wireless internet is needed to support the data features of these and other portable devices currently in the market, and telecommunications firms, such as Spain's Telefonica, are investing heavily in both 3G and 4G connectivity globally.
The functions of these projects are heavily grouped around the ICT and internet infrastructure business activities, as well as design, development and testing. This essentially shows that the current focus for communications companies is on development and deployment.
ICT and internet infrastructure activity attracted $48.67bn of the $61.59bn invested in the sector, which appears to be a response to the growth of its sub-sectors, which all require high levels of infrastructure deployment. The capital spent on ICT and internet infrastructure in 2013 was the highest recorded since fDi Markets began tracking and was supported by a 66.5% rise in project numbers to 328.
Interestingly, capital investment into innovation-focused activities (design, development and testing, as well as research and development) increased to its highest level on record – $8.93bn – a 261.97% rise on its 2012 level, and a 44.22% rise on its 2003 level. This trend looks likely to continue in the future, with a survey of CEOs conducted by PwC finding that 41% of CEOs in the communications sector cited product development and innovation as their main driver of business growth up to 2017.
Major projects in the sector have occurred in a number of sub-sectors, primarily communications equipment and data processing, hosting and related services. Canada attracted the largest two projects, with more than $5bn in telecommunications research and development-related investment announced in 2013.
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