COVID-19: GlobalData Sees No Need for Forecast Changes Yet

Joel Cooper Senior Director – Market Data and Intelligence

Summary Bullets:

• GlobalData has established daily monitoring to assess the possible impact on our core telecoms and pay TV forecasts from COVID-19. As and when required, we will adjust our projections.

• Our measured, evidence-based approach to reviewing and adjusting our forecasts is supported by recent telco executive statements on COVID-19, which point to it being too early to tell what the specific impact of COVID-19 will be on their businesses.

We are actively monitoring our telecoms and pay-TV forecast portfolio countries for possible impact from COVID-19, and are ready to revise our projections as and when required. GlobalData’s forecast coverage encompasses mobile (108 countries), fixed (98 countries), multiplay (22 countries), and pay-TV (57 countries; click here for more.

Our daily monitoring covers a large variety of dimensions related to COVID-19, including:

• The potential impact on GDP and employment.

• The impact on telcos’ 5G rollout projects – a slowdown in rollout could result from travel restrictions on staff responsible for network deployment as well as disruption to equipment shipments and manufacturing.

• The impact on telco retail operations – e.g., a shortage of staff in shops or shops closing down may have a negative impact on subscriber acquisition.

• The impact on telco call center operations (on-shore and off-shore) – a shortage of staff in call centers or temporary call center closures could have a negative impact on customer retention activities, renewals and customer support.

• The impact on telecoms revenue – for example, a telecoms ARPU uplift could potentially occur due to an increase in service usage resulting from reduced physical mobility (e.g., a rise in mobile/fixed data usage, mobile calls, video usage, and virtual meetings/conference calling).

• The impact on handset sales, driven by potential disruption in handset manufacturing supply chains.

Our evidence-based approach to reviewing and revising our forecasts is supported by recent statements from several telcos. Collectively, these statements highlight that it is currently too early to accurately assess the impact COVID-19 will have on telecoms markets.

On March 11, 2020, for example, Telecom Italia’s CEO, Luigi Gubitosi, made comments to the effect that it was at this stage difficult to determine the impact the epidemic would have on the company, but highlighted possible risk related to damage to the economy. In the U.S., AT&T Senior Executive Vice President and CFO John Stephens stated on March 10, 2020 that the company had not seen “a significant impact in its supply chain at this point.” Verizon has said it is yet to experience any material impact from the epidemic, mentioning that its supply of devices and network equipment have not, as yet, been affected, but acknowledging that both could be affected in the future. Deutsche Telekom’s CEO Timotheus Höttges made similar comments in February.

Furthermore, analysis of several previous epidemics shows that telecoms markets have proven broadly resilient to disruption caused by virus outbreaks. These cases support our view of taking a measured, evidence-based approach to revising our forecasts. We are fully aware, though, that the magnitude of the COVID-19 pandemic is unprecedented in recent times and, as such, the relevance of these cases could be limited.

One key case is the Ebola epidemic that struck several West African countries between 2013-2016. This was the largest recorded outbreak of the disease since its discovery in 1976. Liberia, the Republic of Guinea and Sierra Leone were particularly impacted, experiencing significant disruption to everyday life and to their economies. Sierra Leone implemented nationwide lockdowns and mass quarantines. In total, circa 30,000 people were infected in the region and the fatality rate was circa 40%. However, during the key years 2014 and 2015, mobile subscription evolution in the Republic of Guinea and Sierra Leone proved resilient, experiencing no material impact.

Similarly, South Korea experienced no discernible negative impact on total mobile subscriptions or total fixed broadband subscriptions during the Middle East Respiratory Syndrome (MERS) outbreak in mid-2015.

Furthermore, neither total mobile ARPU nor residential fixed broadband ARPU were obviously impacted by the MERS outbreak. Mobile ARPU declined fractionally in 2015 versus 2014, with some headwind caused by the dilution effect on ARPU of M2M/IoT. Residential fixed broadband experienced a decline in 2015, but this should be seen in the context of decline in the preceding years.

This is an unprecedented period for telecoms operators. As yet, it is unclear how the sector and specific telcos will be impacted by COVID-19. However, it would be prudent for most operators to avoid knee-jerk reactions and significantly change their internal forecasts (e.g., budgets and strategy plans) until evidence emerges that changes are warranted.Telcos in countries that are currently unaffected by COVID-19, or affected on a limited basis, should avoid complacency and closely monitor how operators in affected countries are being impacted – for example, at the network level or handset supply level – and how they are reacting. For a summary of early telco responses to date, please see COVID-19: What’s a Telco to Do?, March 13, 2020. Telcos in unaffected countries have a window of opportunity to prepare networks and services now, in anticipation of COVID-19 establishing itself in their countries.