New research has revealed that global telecoms operators will not be immune to the impact of the Covid-19 outbreak and that the sector’s recovery will take up to four years.
While the severity of their exposure will depend on a range of regional factors, a new report by Analysys Mason unpacks mild, medium and severe scenarios for the service revenue future of global operators.
The report indicates that telecoms operators’ service revenue worldwide will contract by between 2.5% and 5.7% in 2020.
“We expect worldwide operator service revenue to decline between 2019 and 2020 by between $40-billion and $92-billion, whereas our previous pre-Covid-19 forecast predicted growth of $27-billion (1.8%) for the same period,” the company says.
These losses will not be fully recouped in future years.
A mild forecast shows telecoms service revenue will fall by 2.5% worldwide in 2020 and return to 2019 levels in 2021, while the severe forecast shows service revenue falling by 5.7% worldwide in 2020 and only returning to 2019 levels in 2024.
“In all scenarios, fixed business service revenue will see the greatest declines in dollar terms, but mobile business service revenue will decline faster in percentage terms,” Analysys Mason adds.
While geographical variations are largely determined by the timing of the virus outbreak, the economic ramifications of each country’s response to the pandemic and the service mix of the regional revenue streams, developed markets are expected to fare worse than other regions.
“In dollar and percentage terms, North America has the strongest potential decline, at –8.5%, of any region in 2020, as the severe scenario economic downturn translates into sharp losses in residential mobile and business telecoms services revenue,” the company explains.
This will be followed by Western Europe.
In Europe, voice and broadband services account for more than 50% of business fixed services revenue, resulting in a greater overall impact than in regions such as Asia-Pacific, where corporate business data services dominate.
“Extensive lockdowns in Western Europe and expectations of high unemployment mean that the impact on mobile services revenue may be particularly strong here,” the company points out.
Both developed and emerging Asia-Pacific are expected to have similar potential operator revenue losses relative to their previous growth expectations. However, in the most- severe Covid-19 scenario, these revenue
losses will be higher in emerging Asia-Pacific because the risk of extended economic disruption is high in developing areas, where it may be hard to contain the virus.
In Latin America, the relatively high nominal growth rates are attributed to high inflation; however, significant losses are expected amid a recession, particularly in the mobile prepaid segment, owing to a reduction in migrant workers employed in the region and the curtailment of tourism.
“We expect a hefty, short-term decline in the Middle East and North Africa as the impact of loss of oil revenue hits the economy hard, although we expect stronger resilience in the long run on the back of extensive government financial reserves,” Analysys Mason notes.
The most optimistic scenario presents itself in sub-Saharan Africa, where a mild growth scenario of 2.6% is expected on the back of existing strong growth trends, continued dependence on mobile services and the later arrival of Covid-19.
However, there is potential for severe disruption to economic activity and food security that guides the most pessimistic scenario.