Mobile operators were able to protect their profit margins and cash flow during the recent global recession in a typical way, by reducing capital investment, a new study by Wireless Intelligence suggests. That tends to happen in any recession, so the moves were no surprise. 

But you also can guess what now will follow, namely that investments postponed will create pressure for a new wave of investments, not only for maintenance and incremental upgrades, but to support building of new fourth-generation networks. 

The study found that total global mobile capital expenditures reached a recent peak of $204 billion in 2008, at the beginning of the financial crisis.

That level represented  21 percent of total revenues. Capex had fallen to $197 billion (19 percent of revenue) by 2010. The capex stringency was initially evident in developed mobile markets, where operators reduced capex by eight percent in 2008 and by six percent in 2009.

By 2010 spending ticked up again as many operators began investing in Long Term Evolution. In developing markets, capex reductions were not seen until 2009 (down 0.3 percent) and 2010 (down eight percent).

The study predicts operator capex to remain stable at 16 percent of total revenue in developed markets and 23 percent in developing markets, for at least the foreseeable future. 

Operators also reacted to the global economic crisis starting in 2008 by reducing operating expenditure. That also is typical of recession periods. 

Between 2007 and 2008, total operator revenue grew by 8.4 percent while opex declined from 65 percent of revenue to 61 percent of revenue. As a result, EBITDA jumped from 35 percent to 39 percent of total revenue over the same period.

However, opex has since inched up by a percentage point (to 62 percent of revenue) in 2009 and 2010. 

This increase in operating costs is most evident in developed markets, a result of the higher costs in acquiring, servicing and retaining smart phone customers. Perhaps oddly, smart phone sales have caused a contraction of EBITDA margins. 

You can blame hand set costs for the pressure on margins. 

It is no secret that the costs of marketing smart phones are higher than was the case for feature phones, and that is true for carriers large and small.

MetroPCS, for example. also has seen its costs rise much more steeply than its profits, for example. Its cost per gross addition reached $177.88 in the second quarter, up about eight percent, and its average revenue per user rose to $40.49, up just over 1.6 percent. Read more here.

The growing dominance of AT&T and Verizon (News - Alert) Wireless in the U.S. market has been said to threaten Sprint, but does nothing to help either MetroPCS or Leap, argues 24/7wallstreet.

A merger of MetroPCS and Leap is likely only to delay their inevitable demise. Both AT&T and Verizon Wireless (News - Alert) offer pre-paid phones, and though the pre-paid service is not their preferred business, the two giants could pretty easily eliminate MetroPCS and Leap.

One is reminded of what the advent of broadband did to independent Internet service providers in the dial-up era. Once the broadband shift began, dial-up ISPs found they no longer could compete, as the costs of providing broadband access were higher than dial-up, destroying profit margins.

It might be the case that smart phones and fourth-generation services might have a similar impact on many smaller mobile providers, resellers and channel partners.

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