Telco revenues forecast to contract 3.4% amid COVID-19 outbreak

Research firm Analysis Mason has forecast global revenues for telecoms operators to fall by 3.4% year-on-year as the coronavirus pandemic edges the world towards recession.

While there are certainly industries which are impacted much more severely than telecoms, the airline sector is currently in tatters, revenues are bound to decline. Unemployment and COVID-19 enforced shutdowns are trends which cannot be ignored, irrelevant to how many people view telecoms as a lifeline for remote working.

The result is potentially a year-on-year decline of 3.4% for worldwide revenues, some $40 billion which is not deferred, instead will be lost revenue.

“Consumer telecoms services, which account for the majority (68%) of telecoms revenue, tend to be relatively resilient during economic downturns,” said Stephen Sale, Research Director at IDC. “But large increases in unemployment, business closures and the overall decrease in economic activity will cause a sharp decline in business services revenue.”

Although these figures are limited to the operators, the pain will of course be passed on elsewhere. With the telcos making less money, less will be passed onto expensive projects, while currently there are limitations being placed on the telcos thanks to lockdowns and self-isolation; less work can be done.

What is currently appearing is a self-fulfilling prophecy, a series of events which will gradually slicing slithers off profits.

With businesses throughout the world under pressure, enterprise customers will be prioritising investments. Unfortunately, this means less money flowing into innovation projects, some of which will be investigating how to better use connectivity throughout operations. Slowing down these projects cuts off a revenue supply to the telcos today, but also delays the 5G fortunes of tomorrow.

If less money is coming in from the enterprise customers, it is likely telcos will push-back some of the more expensive projects themselves; the 5G core could certainly be one of those which is placed in the backseat. This in turn will mean next-generation services (such as those which require low-latency features) will see a delay in launch as well.

These are all the negatives, but there is a silver-lining to the storm clouds; the world is now appreciated how important connectivity is to a smoothly functioning society and economy.

Taking connectivity for granted is something which everyone does. It is just assumed mobile signal will be available, broadband networks will function without falter or a Netflix series can be downloaded in minutes. Telecoms is something people are aware of but give little credit to.

On average, Analysis Mason estimates the telecoms industry counts for 2% of a country’s Gross Domestic Product (GDP). This might seem a lot or not much depending on who you are, but with attitudes towards telecoms changing, it could certainly increase quite dramatically over the next few years.

If digital transformation is a buzzword the telco industry has gotten sick of, the rest of the economy is waking up today. Businesses are adapting to a world where mobility and connectivity are building blocks in the foundations. Traditional industries, such as healthcare, are being forced through a digital transformation programme which has been resisted for years.

Telcos will have to weather the storm, as will every industry in these difficult economic conditions, but forced digital transformation programmes and a new appreciation for the value of connectivity could see a new world order once the COVID-19 pandemic has passed.