Analyst firm Analysys Mason reckons the telecoms industry will return to modest growth from 2021, but it will take three years for the industry revenue to come back to the pre-COVID-19 level.
Analysys Mason has shared its leading predictions for the telecoms industry with a group of selected media outlets, Telecoms.com being one of them. Analysts at the firm believed the telecoms industry will suffer a $43 billion drop in revenue this year, equivalent to 2.7% decline from 2019. They foresee a 1% growth in 2021, and the industry as a whole won’t be able to go back to and overtake the 2019 revenue level until 2023.
The analysts recognised that 5G connectivity service for consumers will not deliver meaningful ARPU increase, at least not in the short-term, due to the limited coverage and consumers keeping a tighter hold on their purse strings in difficult times. This will drive telecom operators to seek new opportunities in both consumer and, probably more importantly, enterprise markets.
In consumer markets, Analysys Mason predicts telecom operators will monetise their edge and cloud assets more aggressively, including pushing for edge gaming. They also expect to see fixed-mobile convergence being used by integrated operators as a stronger leverage, by players like Deutsche Telekom, Orange, and Telefonica. Stephen Sale, the firm’s Research Director for Consumer Services, highlighted that fixed broadband business has helped offset the decline in mobile for many operators. He also believed that the fixed wireless access business, which has registered a healthy 4% growth, will continue to expand.
A result of long periods of “staying home” is big hikes in consumers’ screen time, most of which spent on video streaming (while time spent watching linear TV has either remained flat or declined). Analysts therefore predict that, to reap some reward of this trend, operators will play a more active role in the streaming service market, for example providing consumers with managed service swap between different streaming platforms.
In business and enterprise markets, with the increased deployment of 5G core, telecom operators will be in a better position to serve remote work with unified communication solutions, including security and access. Analysts also believe ambitious operators will start supporting other sectors under transformation, for example remote healthcare and education.
When it comes to the vendor market, Analysys Mason believes the disaggregation of 5G market will put traditional suppliers under more pressure. Specifically, the prediction builds on the recent trend that sees more operators going for different RAN and core suppliers, and virtual RAN deployment, though to be largely deferred to beyond 2021, will create a market worth $40 billion by 2025. It also foresees more telecom-specific capabilities being acquired by cloud vendors, a la Microsoft acquisition of Affirmed Networks and Metaswitch.
Automation is another factor to drive industry growth. This includes both more automated customer services for consumers, as well as continued investment in automated network orchestration, especially for advanced 5G, which Analysys Mason expects to see a five-fold growth from $4 billion this year to $20 billion in 2025. A by-product of increased automation, however, is that more staff, in particular those whose skills can be automated, are expected to be made redundant.
A recent trend, as a result of telecoms assets becoming cheaper, has seen non-traditional investors buying up or attempting to buy up telecom operators, including both those with physical infrastructure and MVNOs. Analysts at Analysys Mason see the trend continuing. Moreover, in addition to investors acquiring passive infrastructure, the firm’s analysts predict that in 2021 investor interest will move up the value chain to include more wholesale access to fibre and mobile.
None of these predictions is ground-breaking, most of them being continuation or acceleration of emerging or existing trends in the market already. However, Analysys Mason did make one bold prediction, to “put our neck on the line” as Tom Rebbeck, the firm’s Head of Operator business services and IoT research, put it. At least one major mobile operator will acquire one of the IoT market disruptors, the prediction goes.
The analysts argued that, despite the interest, telecom operators have largely failed to generate sizeable demand for their IoT offerings. Instead, it is the non-orthodox entrants like 1NCE, EMnify, and Twilio that have cracked the market. 1NCE has sold over 5 million SIMs in two years, thanks as much to its lower price positioning as to its simple transaction model (buying directly online). In lieu of responding by building their own solutions, Analysys Mason reasons, mobile operators are more likely to buy the successful ones outright.
Rebbeck was reluctant to put his neck further on the line by naming a possible buyer, but he believed it must be one of those that have high ambition in IoT, and those leading innovators are likely targets. This may make sense conceptually, though the numbers are hardly appealing. 1NCE, which Deutsche Telekom has a minor stake in, sells flat-rate IoT connections at 10€ for 10 years, equalling a monthly ARPU of 8 Euro cents.
Nonetheless, a concrete prediction is more valuable than a long line of broad-brush commentaries, so we commend Rebbeck and his team for the courage, even if it might not “age well” when we look back this time next year. The firm doesn’t predict another black swan event like the pandemic, which is the last thing the industry, or the world, needs.
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