Telecoms has been spared the worst of the harm from the coronavirus pandemic and resulting recession, but it has not been completely immune.
Lockdowns not only reduced demand for new handsets, but a drop in travel saw operators lose out on much of their roaming revenue. Meanwhile, supply chain disruption hit the delivery of handsets and other hardware.
However, changes in digital habits are changing demands – and creating new business opportunities.
A tale of four segments
The four main sub-sectors of telecoms have seen very different impacts from the pandemic, with some being hit far harder than others.
Technology and software has seen moderate impact from lowered capital expenditure, but have otherwise remained relatively unhindered, with network management seeing growing automation.
Meanwhile consumer telecom services and social media have shown very limited negative impact, with strong company results in 2020 – and the potential for significant business opportunities as a result of consumer habits being reshaped by the lockdown.
However, consumer platforms and devices have taking something of a hit, particularly with the delay of many 5G launches and muted handset demand.
Meanwhile, worst hit are semiconductor and component makers, who have seen their margins hit by a marked drop in consumer demand for products containing semiconductors – largely due to the increased time spent at home.
Case study: Fixed communications in the UK
The overall number of fixed access lines in the UK is set to drop significantly over the next five years, although some access types, most notably fibre optic, will see an increase. This is set to be replaced by an increase in reliance on mobile communications, most notably 5G.
UK access lines by technology, 2016 - 2025
5G in focus
Enjoying network launches in countries around the world, 5G was supposed to see a strong year in 2020. However, it was hampered by the coronavirus pandemic, not least because of the bizarre conspiracy theory that the technology was the cause of Covid-19.
In some areas, attempts to install 5G equipment were hampered by arson and abuse of staff – although there is little evidence to suggest this had any meaningful impact on rollout. Meanwhile, some consumers showed suspicion of the technology because of the conspiracy theory.
However, as the year progressed 5G saw some adoption as an alternative to poor broadband options, while the more meaningful negative impact came in the form of supply chain disruption, which impacted the delivery of handsets, and a general slowdown in consumer handset upgrades. Nevertheless, 5G is expected to see strong growth in the next few years, and while it may ultimately be somewhat delayed by 2020, widespread adoption is ultimately inevitable.
“Over the next year, we can expect new 5G services to be developed that align with some of the big online trends that have taken centre stage during the Covid-19 pandemic,” said Avishai Sharlin, division president at Amdocs Technology.
“Remote working, eLearning, and online gaming could be among those 5G use cases to see the most considerable growth in the short term.”
5G subscriptions: Leading markets in Europe
5G is expected to see significant proliferation in Europe over the next five years, with GlobalData predicting that more than half of subscriptions will be 5G by 2025 in Denmark, the UK, Austria, Switzerland and the Netherlands, the top five counties in the region.
Top five markets for 5G subscriptions as a percentage of total mobile subscriptions for 2025
The streaming challenge
At the start of the lockdown, streaming and cloud traffic was expected to surge, and surge it did, with many upping their use of such platforms as a proxy for other less socially distanced activities.
This created a potential challenge for broadband providers in particular, as it increased traffic demands at a time when good connectivity was essential for many, although it did also create new business opportunities.
The challenge was tackled by major streaming providers, who agreed to downgrade their highest traffic, HD offerings for the duration of lockdown, significantly improving the strain on networks.
Meanwhile, in recognition of the essential nature of their service at a time of furloughs and financial uncertainty, many broadband providers also have opted to waive late bills for much of 2020, and provide increased support to the financially vulnerable.
Completed telecoms deals in 2020
Worldwide completed mergers and acquisitions in 2020 started fairly strong compared to 2019, with both February and March showing an increase on the previous year. However, the impact of the pandemic has been notable from April onwards, showing a sharp reduction.
September has narrowed the gap somewhat, so Q4 may begin to see a return to normalcy for companies.
Completed global telecoms mergers and acquisitions: 2020 versus 2019
With a wider focus on digital transformation likely to see a strong step-up in the coming years, the future prospects for telecoms are extremely strong.
GlobalData advises providers to be mindful of changing consumer demands in light of the pandemic, and respond with appropriately tailored products. It also encourages companies to position themselves as digital leaders and partners to cement their future positions.
In general, while an ongoing recession may hamper some consumer demand, telecoms is likely to see a rapid recovery.
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