Summary Bullets:
• The telecom wholesale market will remain stable in 2020, with declining roaming international revenues, and expansion of FTTx and international backbone infrastructure.
• Wholesale providers with large international foot prints, and providers offering differentiated digitized wholesale solutions will show early success in 2020.
Impact of COVID-19 on the Telecom Provider Market
Overall, telecom providers have experienced pressures on profits as a result of the COVID-19 pandemic. However, unlike other segments the telecom provider market has maintained stability due to strong voice and network connectivity demand, both at a consumer and business level as a result of the lockdown and large percentage of the workforce moving to remote working.
GlobalData has analyzed recent quarterly results of service providers and this shows limited financial impact overall during Q1 2020. Some of the key observations we highlighted previously include:
• Decline in consumer and enterprise roaming revenues as a result of travel restrictions.
• CapEx remaining steady in 2020, and 5G lagging.
Telecom Wholesale Market
Overall, GlobalData expects the telecom wholesale market to remain stable in 2020. Key contributing factors which will influence its growth include an overall decline in international roaming revenues where in some instances will be +50% due to lockdown measures implemented across the globe, and an increase in connectivity revenues and voice traffic +5%. Additionally, the telecom wholesale market will experience further balancing in 2020 due to the:
• Build out of FTTx coverage, particularly home and business markets due to the lockdown. Recent examples include U.S. operator CenturyLink announcing the connection of 300,000 homes and small businesses to its fiber network and plans to add another 400,000 in the future.
• Expansion of backbone network infrastructure, particularly to connect countries in Africa and Asia. Recent examples include expansion of Vodafone’s footprint of Europe and sub-Saharan Africa with the announcement of SHARP, its 37,000km of new subsea cable. SHARP will capitalize on Vodafone’s previous strategic initiatives with partners like Vodacom and Safaricom to build a digital society for this region.
• Growth in international voice traffic through partnerships between global providers and local country entities. Here global players will be able to gain country footprint, whereas the local country providers will benefit by connecting to an international player. Thus, enabling their home customer base to gain global access. Orange is one recent example where we have seen this occurring with its partnership with PLDT in Philippines to aggregate international voice for inbound traffic terminating on the PLDT and Smart network.
• Continuation of incumbents and wholesale providers to offset traditional declining voice revenues and compete/partner in a changing competitor playing field against OTT providers. Providers will differentiate and deliver a portfolio of services capitalizing on its strong network capabilities and footprint. Potential high growth solution offerings are around Anti-Fraud, Mobile Roaming, Internet of Things, Business Analytics, Cloud Comms, and Machine to Machine. With respect to this GlobalData continues to see success and overall extension of provider wholesale portfolio, although expansion in 5G has slowed down due to COVID-19.
Wholesale Providers Must Seize the Opportunity, Post COVID-19
Overall, the COVID-19 pandemic has caused a huge impact to the global economy. However, recent 2020 telecom wholesale trends and provider activities in the last five months demonstrate a hunger to grow. In particular, both incumbent telcos and pure play wholesale providers should continue with robust portfolio strategies and sales efforts to differentiate in the marketplace to generate revenue growth. This covers a continuation for incumbents to reach countries like Africa and Asia through increased footprint and partnerships for international voice, and utilizing their network capabilities to offer high touch digitized wholesale solutions in applications like IoT. Here companies like Telefonica are offering a strong and innovative set of products focusing on customers in key markets by focusing on digital technologies and strong security credentials. Portfolio coverage includes enhancing the company’s voice and UCC portfolio, incorporating BI and analytics in roaming and virtualizing its networks with the aim of harnessing technology such as AI and block-chain. Such portfolio initiatives will enable the provider to stay relevant and compete and partner with a differentiated offering in a changing competitor landscape.
Other examples include players like BT adding API interfaces to its contact center solutions to allow channel partners to develop and integrate their own AI bots. Such strategies aim to support BT’s move in looking to boost revenue through improving the way it interacts with customers, and selling a portfolio of innovative products in categories such as network services.
Other non-telco incumbent examples include companies like Syniverse, a private mobile network provider that is focusing on innovation and working with technologies including block chain for enhanced billing with IBM. It is also aggressively expanding its network and embracing wholesale IoT and 5G services.
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