Capex: up for differentiation, down for extortion

Capex is weighed carefully against dividends. Capex is for longer term competitiveness, dividends are for short term investor satisfaction.

Reducing capex is hazardous, since it endangers the operator's competitive position. Capex enables differentiation. Smart investors will not be fooled.

If capex is reduced across the board, the cause may not be clear and can be any of these:

• It's typical herd behaviour of management executives lacking vision, focusing too much on short term dividends for personal gain.
• It's proof of insufficient competition among ISPs.
• Market conditions deteriorate for all players, due to general developments (economy, regulation, technology development).

At the end of the day, capex still enables differentiation. Hence, capex reduction seems to point to insufficient competition or bad management.

Threatening to reduce capex appears to be a form of bluff as well as extortion or black mail of governments.