MTN Consulting’s latest report delves into the trajectory of telecom operators’ financials, signaling notable shifts in revenue, capital expenditure (capex), and evolving business models within the industry.
Capital Expenditure and Workforce Trends
The report unveils a fluctuating landscape in capital expenditure, significantly impacted by technology upgrades, governmental interventions, and shifting market dynamics. In 2022, capex surged to an all-time high of $328 billion, accounting for 18.1 percent of revenues within the coverage timeframe (2011-present). Projections suggest a gradual decline in capex until 2025, followed by a modest uptick to reach $331 billion by 2028, marking a 17.1 percent capital intensity. Notably, the report anticipates a decline in telco headcount to under 4.2 million by 2028, down from approximately 4.6 million in 2022, while labor costs per head are expected to resume an upward trajectory in 2023.
Telcos’ Financial Outlook
Telecom operators have been navigating a landscape of declining capex, with a more pronounced downturn foreseen in 2023 and 2024, as indicated by recent earnings releases. A notable 8 percent year-on-year drop in telco capex during 3Q23 aligned with preliminary figures showcasing over a 10 percent year-on-year decline in revenues for vendors catering to the telco market. The accelerated decline in capex has prompted telcos to diligently address cost factors, both operational and capital-related. There’s a growing recognition among savvy operators that major players in the tech industry are poised to capitalize significantly on the advancements in 5G networks.
Facing sluggish growth in 5G revenues, telecom companies are exploring asset divestments and pivoting toward innovative business models. Case in point, A1 Telekom in Austria successfully divested a portfolio of 12,900 cell towers across five countries, shedding 1 billion Euros in debt. Similarly, Polsat, a Polish operator, made strides by venturing into renewable energy, solidifying deals with tech giants like Google while investing in wind and solar energy infrastructure. The report highlights telcos’ potential to shift to asset-light models by divesting passive assets and exploring new revenue streams in adjacent markets like energy.
Global telecom revenues in 2022 amounted to $1.78 trillion, with a slight anticipated decline in 2023. However, the forecast indicates a steady average annual growth rate of 1.4 percent, projecting revenues to reach $1.93 trillion by 2028.
MTN Consulting’s comprehensive analysis underlines the telecom industry’s transformative journey, navigating challenges and exploring avenues for sustainable growth amidst an ever-evolving market landscape.