Telecommunications market

Circumstances continue to force the market’s transformation

by Jean-Luc LEMMENS

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

454billion € for fixed services in 2023

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

Source : IDATE DigiWorld in “World telecom markets”

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

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Source : IDATE DigiWorld

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