TELECOM

The telecommunications services industry is a $2,000bn business made of strongly regulated national markets dominated by a handful of companies, with only a few truly international players. 2019 saw global revenue shrink by an estimated -0.5% with a clear divide between advanced (-0.5%) and emerging economies (+5.5%).

In advanced economies, the telecommunications market is largely saturated with fixed-broad penetration standing at about 30-40 subscriptions per 100 inhabitants, and mobile penetration generally far above 100 subscriptions per 100 inhabitants. The rollout of fiber networks is the main driver of growth for fixed telecommunications, while large-scale commercial 5G services will only begin in late 2020-2021 in a few large countries. Market maturity has generally made competition a negative-sum game with telecommunications companies cutting rates to lure customers from competitors. Some telecommunications companies generate a significant share of their profits, thanks to additional pay-TV services, which are increasingly competing with similar services provided by new entrants. We anticipate another year of decline in Europe and very moderate growth in the US turning to 2020. Japan, which will launch commercial 5G services this year, could see growth of about 4-5% thanks to higher average revenue per user (ARPU).

In emerging economies, mobile telecommunications dominate the market and penetration is already high across most regions (80 subscription per 100 inhabitants in Sub-Saharan Africa, 87 in South Asia, 100 in Latin America). The rollout of mobile broadband as well as additional services (banking, etc.) are the main growth drivers. 2020 will most likely see lower growth due to the global economic slowdown and the greater reliance of local companies on prepaid plans, which customers are generally more prone to cut.