While people, companies, and governments around the world leaned on connectivity to keep the lights on, many expected that the global telecoms industry would be riding high and mighty during one of the hardest years humanity has ever faced.
Contrary to that, the reality of the situation is much bleaker than many could imagine.
Telcos around the world took a beating during 2020, with the COVID-19 pandemic shaving off a whopping $43 billion in revenues when compared to 2019, a recent study by UK-based global consulting and research firm, Analysys Mason.
“While the outlook for 2021 is better, spurred by booming activity in the connectivity and remote working segment, it will take the industry up to 2023 to return to its pre-Covid-19 level,” the study said.
The colossal dip in global telecoms industry revenues represented a 2.7 percent overall drop, mainly due to lockdowns enacted by governments around the world, which stagnated major services such as roaming, pre-paid, and voice calls.
Analysys Mason expects that a third of this loss will be recouped in 2021 with growth of USD13 billion (up 1 percent on 2020), but global telecoms revenue will not exceed 2019 levels again until 2023, which is not enough to relieve operators from the ongoing pressure of adaptability.
Telcos were very agile in responding to the sudden shift in worldwide habits, enacting the necessary strategies and business models to keep the world connected, but many consider 2021 to be a fairly grim financial year for the industry at large.
While the pandemic skyrocketed the demand for connectivity, the growth wasn’t able to single-handedly carry the weight of other segments. “A lot of operators will be pleased to start reporting growth from April, but we are expecting pretty gloomy times in 2021,” Analysys Mason’s Director for Consumer Services, Stephen Sale, said.
In parallel, Sale suggested that all this coupled with the cessation of many government support schemes which had helped keep in trouble players afloat in 2020, there will likely be a rise in business failures in the sector.
2020 was expected to be telecoms’ big year, as operators were ready to push hard for 5G rollout, the pandemic severely hampered those efforts and resulted in current fifth generation network deployments to offer limited improvements to its 4G counterpart.
This was primarily caused due to companies reallocating funds earmarked for 5G rollout and development, to be placed to reinforce and strength current networks and systems to meet the overly increasing demand for connectivity while people were stuck within their homes.
This will drastically push 5G-oriented strategies further until the global telecoms industry can lick its wounds and re-establish their revenues streams to pre-Covid times.
This blow was echoed by Analysys Mason, who stated that while 5G was one area that had been put forward as a potential economic savior in this current climate, unfortunately, this has been overstated.
“Even with widespread rollouts this year expected to boost both direct average monthly revenue per user (ARPU) and also generate major opportunities with industry, amid the sustained economic crisis the world is enduring, customers remain unwilling to pay a premium for 5G at this time,” the study highlighted.
As traditional revenue streams have spiked downwards, and 5G failing to become the champion telcos had hoped for to elevate the heavy losses inflicted by the pandemic, operators need to exercise haste in adapting their business models to deliver broader services across the board.
Head of operator services and Internet of Things (IoT) research at Analysys Mason, Tom Rebbeck considers that the answer is to emulate the strategy of Orange Telecom.
“It will probably be an operator that has already invested in IoT. I would expect it to be one of the larger ones,” Rebbeck explained; the French telecom giant already garners 40 percent of its revenue from IT rather than from traditional telecoms.
However, he added that even with this kind of adaptation, the health of the industry will flounder. This year “gets worse before it gets better,” he remarked, as much of the government funding has kept many companies going dries up. This means potentially that “in 2021 lots of them will be put out of business.”
The global telecoms industry has a lot of work to do to recuperate from the losses of 2020, it will need to innovate and flush out its legacy offerings, especially as worldwide competition grows, and the race for 5G speeds up even more.