Circumstances continue to force the market’s transformation
The telecoms industry’s transformation continues, whether it likes it or not. As competition creates pressure on prices, the industry is grappling with an array of challenges. The need to invest in ultrafast networks requires especially high CapEx. But the industry also has a number of opportunities for a rebound.
Massive investments leading to stagnant revenue
Telecom services’ share of total DigiWorld industry revenue is at an all-time low. In 2013, telecom services accounted for 43% of total DigiWorld industry revenue, but that figure in 2019 has tumbled to 33%. IDATE DigiWorld forecasts that this percentage will continue to shrink, standing at a mere 28% in 2023. A similar trend is playing out in every region across the globe, with market value shifting to Internet services, and to a lesser degree to the IT & software sector.
Telecom services revenue growth will accelerate slightly
At the same time, investment imperatives continue to grow. Capital expenditures as a percentage of revenue remain very high. FTTx network rollouts are ongoing and, in 2019, were covering 861 million households. IDATE DigiWorld expects 1.65 billion households to have fibre access by 2023. Added to which 5G is now a reality in several countries, with 1.7 billion 5G SIM cards expected to be in use by 2025.
Telecom services' market share continues to shrink
Change in global DigiWorld market breakdown by sector
Disparate regional strategies
We are seeing different regional strategies to address this trend of shrinking revenue and a parallel rise in needed investments.
In Asia-Pacific, government authorities have implemented very pro-active industrial policies. Public funding is being made available to accelerate the deployment of infrastructures deemed vital for the economy. Telecoms operators are being subjected to stringent rollout targets and price caps. China and South Korea offer two prime examples of these policies.
Regulators in North America are approving operator mergers, which in turn lead to better margins and so enable telcos to continue invest massively in their future.
In Europe, meanwhile, public policies remain heavily focused on keeping the telecoms market very competitive. Public funding is being made available at both the European and national level, to facilitate infrastructure rollouts in more sparsely populated areas, albeit without reaching the levels seen in Asia. Infrastructure-sharing schemes are understandably being encouraged more and more.
Recovery opportunities for the telecoms industry
Virtuous circle of telecom service investment
The main telecoms industry trends
5G will soon become a key variable in the progression of telecom services. Above all, it will pave the way for an acceleration of network virtualisation, which a number of operators have already begun. The virtualisation enabled 5G and its network slicing will facilitate the emergence of a host of new services, notably B2B ones. It will also revive opportunities for FWA services and the creation more feature-rich and flexible enterprise private networks.
Meanwhile, fixed networks continue to vie for the role central access hub in households. Operators’ boxes are a crucial asset when going head to head with the top Internet platforms. The launch of new boxes that incorporate increasingly rich network services need to enable better monetisation of operators’ services.
And, finally, the industry’s carbon footprint has become a prime area of focus for operators who are expected to make a growing number of commitments in this area. This social responsibility will also be reflected in their marketing messages.