Three years for pandemic recovery after $43bn hit this year

‘Three years’ for pandemic recovery after $43bn hit this year

01 December 2020 | Alan Burkitt-Gray

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The telecoms industry will take until 2023 before its revenue exceeds that for 2019, according to new research.

The industry will see a US$43 billion fall this year on last year’s number — a 2.7% drop because of the pandemic. “One third of this will be recouped in 2021,” said Stephen Sale (pictured), Analysys Mason’s research director for consumer services.

Revenue has been hit in roaming, prepaid mobile and traditional business services, added Sale, previewing Analysys Mason’s annual forecast for the industry.

“A lot of operators will be pleased to start reporting growth from April,” he said. “But we are expecting pretty gloomy times in 2021.”

The company sees no significant revenue from 5G in 2021. “It’s not a gamechanger for consumers,” he said. “They are less inclined to pay more and will be wary of long-term contracts.”

But consumers are spending an average two hours more in front of screens because of the pandemic, Sale added, benefiting streaming services such as Disney+ and Netflix. They will see 17% average growth, while their pay-TV rivals are flat.

Sale’s colleague, Tom Rebbeck, head of operator services and internet of things (IoT) research, expects one of the major operators to acquire an IoT specialist. “It will probably be an operator that has already invested in IoT. I would expect it to be one of the larger ones,” he said at Analysys Mason’s preview yesterday of its annual forecast.

But Rebbeck was as sceptical as his colleague Sale about the overall health of the industry. Next year “gets worse before it gets better,” he said. Government funding has kept many companies going in 2020, “but in 2021 lots of them will be put out of business.”

Some telcos are doing well in IT services while connectivity revenue was going down, he said, pointing to Orange, “where IT revenue is approaching 40% of total business revenue”. In “a few years” some companies will earn as much from IT services as from business telecoms, he suggested.

One area that will do well is software defined wide area networks (SD WAN), he said, especially with fixed 5G as a backup to broadband.

Larry Goldman, head of networks and software research at Analysys Mason, said he sees more investors moving into the industry in 2021, connecting cloud and webscale companies. “These are not just passive investors.”

He also thought that 5G “doesn’t change the world” in its current form. “The future of 5G will be that it can do something different,” especially connecting cloud and the edge.

He expects an increasing number of telcos to spin out their fibre infrastructure into independent wholesale companies. “Ownership and control used to be dominated by the established telcos. There’s a move to disintermediation,” said Goldman.