Telecom service spending may not grow despite spike in data: IDC

Telecommunication services spending are forecast to reach $1.6 trillion in 2020 with nearly flat growth compared to 2019, the latest IDC report said.
Nepal smartphone user image by SanjaalThe increase in the use of telecom services due either to lockdown or work-from-home policies that many companies have implemented for their employees to follow will not directly translate into a surge in telecom spending due to many households having unlimited voice calls and unlimited Internet services.

Businesses will not be spending enough on telecom services because they are either faced with temporary shutdowns or are closed altogether. According to the latest IMF estimates, growth in global GDP in 2020 will drop to –3 percent due to the spread of coronavirus epidemic.

Facts such as the transition to IP and cloud services with lower ARPU as well as reduction in GDP growth in the second half of 2020 are key factors that challenge the telecom services market in 2020.
GDP forecast by IMFSlower net additions, especially in the consumer mobile segment, as retail outlets are closed during lockdowns, will be another challenge for telecoms.

Research firm Analysys Mason earlier said COVID-19 will lead to a strong decline in telecoms revenue in 2020. Telecoms operator revenue is expected to drop by 3.4 percent in 2020, before returning to growth at 0.7 percent in 2021.

“We expect the telecom services market to weather the current conditions better than other elements of the ICT market,” said Carrie MacGillivray, group vice president and general manager, Worldwide Telecom, Mobility, and IoT research at IDC.

Matt Walker, chief analyst at MTN Consulting, said network traffic has declined due to weak economic activity, but a shift in where people work has caused network spikes. Some regulators freed up spectrum to accommodate for these changes, including those in South Africa, Ireland, and the US.

The spread of coronavirus has impacted several telecom companies. Satellite firm OneWeb declared bankruptcy. COVID-19 accelerated the bankruptcy filing of US-based telecoms operator Frontier Communications.

Baburajan K