Management consultancy firm Analysys Mason has warned of the challenges facing the telecoms industry in the year ahead. Like many other industries, the biggest issue it faces in 2023 is how it copes with the impact of inflation, particularly rising energy costs, and the reaction to any price rises that are passed on to customers. This is set against a backdrop of existing market challenges that are already testing the industry’s ability to deliver services, open up new revenue streams and return value to shareholders.
The telecoms industry is experiencing a mix of declining revenue and increasing investment costs. It has underperformed compared to the market index over the past decade, reporting a low return in 2021 (7 percentage points below the European market, and a similar performance against the markets in North America and Asia), and it has some of the highest capital expenditure thanks to network and infrastructure investments, particularly relating to deploying 5G, the further evolution of 5G architecture and the prospect of 6G.
“After a decade of low inflation and low interest rates, the telecoms sector faces the uncertainty of how it will be affected by these cost increases and the degree to which it can increase its own prices in response,” said Larry Goldman, Chief Analyst at Analysys Mason. “Combined with high investment costs and questions about potential returns, the market outlook is challenging as the telecoms industry tries to steer its path through price rises, rolling out network availability and launching new services.”
Analysys Mason has outlined the 10 key focus areas for the telecoms industry in 2023:
- Price rises for telecoms services will become a political issue — operators may raise retail prices, but ARPU may not keep pace with inflation, meaning a cut in real terms.
- Telecoms operators were relatively unscathed in the pandemic but must now cut costs – they most focus on reducing energy costs, starting with decommissioning older networks.
- Telecoms operators will maintain 5G investment plans despite few prospects of short-term returns.
- The metaverse will not materialise in 2023, but many more telecoms operators will align their roadmap to fit the vision of an xR-centric future.
- Telecoms operators will not give up on digital services despite some mixed results.
- Private networks take-up will continue, but progress will not be smooth.
- Demand for multi-cloud connectivity will drive the launch of new solutions.
- Open RAN will expand in rural and enterprise environments but the crucial massive MIMO challenge will remain inadequately addressed.
- The use of SaaS deployment models will grow by 19% in the telecoms industry in 2023.
- Direct satellite-to-device connectivity will enter a second wave – we expect significant developments in 2023 beyond the first moves made by Apple, Globalstar, SpaceX/Starlink and T-Mobile.
- These observations are supported by more detailed analysis in three separate reports for: consumer and enterprise services, networks and software and satellite.
The full 2023 predictions can be found here.