Telecom revenue to be hit by COVID-19 fallout in 2020, report says

A new report from Analysys Mason predicts that telecom revenue in developed markets will drop 3.4% year-on-year in 2020, although the sector is expected to hold up relatively well as COVID-19 keeps much of the world in lockdown.

The analyst firm had previously forecast growth of 0.7% in 2020 and 0.8% in 2021, but it said operators in developed economies are set to experience "lost" revenue of more than $40 billion each year. Growth of 0.8% is still predicted for 2021, "driven by pent-up demand in consumer broadband."

Telecom is regarded as a more resilient sector than most, performing ahead of general GDP trends. Analysys Mason expects telecom and pay-TV services to account for 2% of GDP in 2020, an increase from 1.9% in 2019. Consumer services account for 68% of telecom revenue, but the sector has been adversely affected by increases in unemployment, business closures and the overall decrease in economic activity.

Analysys Mason noted that operators should be able to limit the impact on profitability, with operator capex likely to fall in 2020. The pandemic will reinforce and accelerate existing downward opex trends rather than introduce new ones, the company added. "Profits will fall, but we do not expect overall EBITDA margins for the sector to decline by more than 2 percentage points," it said.

Rupert Wood, research director at Analysys Mason and co-author of the report, said telecoms should stay healthier than almost any industry in this crisis.

"Telecoms should show some of the strongest post-crisis investment, in part because cashflow is more resilient in the telecoms sector than it is most others, and because some governments will emphasise 5G and fibre in stimulus packages," Wood said in the report.

Certainly, it is difficult to predict what the full impact of COVID-19 will be once countries start to return to some sort of normality. Operators have been reporting high demand for broadband services, but shops have been closed, affecting sales, and opex is likely to decline. Analysys Mason certainly offers some reassurance to operators, predicting that telecom should stay healthier "than almost any industry" in this crisis, although the fates of individual operators will vary.