$43 billion: The pandemic’s impact on the telecoms sector

With connectivity needed more than ever during the pandemic, you would be forgiven for thinking that this time of crisis could have been a major opportunity for telecoms companies. But the reality of the situation is much more bleak; revenue from numerous streams like roaming, pre-paid, and voice have all sunk, with everyone forced to stay at home for most of the year.

 

This year’s annual forecast from research firm Analysys Mason suggests that the industry will see a $43 billion fall this year when compared to 2019’s figures, representing a 2.7% drop overall.

 

While many operators have been agile in responding to the crisis and have switched up their business models as a result, 2021 is nonetheless set to be a fairly grim financial year for the industry at large. Around a third of the revenue lost in 2020 will be recouped in 2021, but this will not be enough to reduce the ongoing pressure on the operators.

 

“A lot of operators will be pleased to start reporting growth from April,” said Analysys Mason’s director for consumer services, Stephen Sale. “But we are expecting pretty gloomy times in 2021.”

 

Furthermore, next year will see the cessation of many government support schemes, which will in turn lead to more business failures. For the analysts at Analysys Mason, 2021 is set to get worse before it gets better.

 

5G is one area that has been vaunted as a potential economic saviour in this current climate, with widespread rollouts this year expected to boost both direct ARPU and also generate major opportunities with industry. This too, unfortunately, has been overstated, with customers proving unwilling to pay a premium for 5G at this time. 

 

This is hardly surprising, given that most deployments of 5G currently offer only a limited improvement to 4G services.

 

“The future of 5G will be that it can do something different,” explained Larry Goldman, head of networks and software research at Analysys Mason. 

 

By this, Goldman does not only mean things like augmented reality and driverless cars, but wider applications of 5G’s edge computing and cloud capabilities, which currently remain in their infancy.

 

As a result, with traditional revenues down and 5G failing to produce the spike in revenue that some operators had hoped, many operators are moving to adapt their business models to encompass broader services, whether that might be mobile money, cloud services, gaming or more. One major new area is IT services, with Orange being mentioned as an example, where around 40% of its revenue now comes from IT rather than from traditional telecoms.

 

And, of course, we should not underestimate the current trend to spin off company infrastructure arms, whether to sell them to giants like Cellnex, who has been on the warpath of late, or simply to allow them to operate at independent wholesalers.  

 

Overall, the report from Analysys seems, as expected, to present grave reading for the telecoms industry. Nonetheless, it also highlights the importance of operators shifting their priorities if they want to remain successful – a process which was already beginning when the pandemic first hit.