Mobile operators will witness improved revenues

mobile operators

This year has been tough for telcos and mobile operators due to the rapid spread of the Covid-19 pandemic. 

The global market decline in revenues from roaming, advertising, and equipment sales contributed to a 5.4 percent YoY reduction, bringing overall market revenue to $427B in 2Q20, according to a report by Research and Markets. 

Telco Capex also mirrored the declining revenue trend, as it slid 6.2 percent YoY and touched $65.5B in 2Q20. “Telcos also held back on discretionary spending due to future enterprise spend worries. Looking ahead, telecom network operators are likely to revisit their capex budgets and slash spending on 5G,” the report added. 

There are multiple reasons for the decline: a decrease in handset sales due to the closure of retail stores and supply chain disruptions and a drop in roaming revenues caused by global travel restrictions. 

Mobile handset production also has been under pressure from the supply side, due to a shortage in components and stalling of related supply chains impacted by labor shortages and logistic disruptions.

Though mobile operators worldwide have tried to balance the impact from reduced prepaid and roaming revenues with uptake of higher fixed internet services and post-paid usage, the top-line growth continued to fall steeply due to the overall decline in economic activity.

However, the tide seems to be turning for telcos. 

According to an earnings preview published by Axis Capital, mobile operators’ revenue will climb in the second quarter due to increased recharges as global lockdown restrictions start to slowly ease. 

“Revenues for mobile operators are expected to improve sequentially in September quarter, as factors like increased recharges, reverse migration, and easing of lockdown curbs helped overcome what is otherwise a seasonally weak quarter, say sector analysts,” the note highlighted. 

The note also highlighted that wireless revenue will grow upwards since it’s driven by the reverse migration, better gross additions, and data subscriber additions. 

“We expect the rise in wireless revenue to be more pronounced for Bharti (2.7 per cent quarter on quarter) than Vodafone Idea (1.4 per cent) as we estimate VIL to continue to report subscriber loss, albeit at a slower pace,” Axis Capital note said.