Tuesday, May 15, 2018

Has Telecom Revenue Growth Already Begun Decline in Developed Markets?

Worldwide spending on "telecommunications and entertainment TV services" reached $1,662 billion in 2017, an increase of 1.4 percent year over year (in constant dollar terms), according to IDC. Virtually all of that growth came from Asia, Africa and the Middle East.

You might also notice something important: the market is said to be “telecommunications and entertainment TV.” If one backs out TV revenue, core telecom revenue might not have shown any growth at all in developed markets.

That is a "statistical trick" that often happens in the market forecasting business when technology muddles industry boundaries, and when it becomes tough to do anything but predict revenue decline, unless the category is expanded.

The obvious example is the "unified communications and business voice market," which now includes a range of industry segments ranging from business voice systems to services such as hosted voice, unified communications services and even the access used to support business IP telephony.

While it is true that the distinctions between the segments have fused, it also is true that unless the categories are merged, the forecast revenue is tiny, and shrinking, in some cases.

If "entertainment video" revenues were omitted, it is quite possible that revenue in many markets would show rather steady decline for some years.

We also have reached a point where inflation arguably has a greater impact on global telecom revenue than anything service providers can do. With the caveat that inflation rates vary substantially by continent and by country, net changes in global service provider revenue now are less than the impact of underlying inflation.

At a time when inflation is running between two percent and eight percent, with some countries having far-higher rates, it seems clear that actual growth is quite possibly already negative in most regions and countries.

Fixed voice is flat at best, while mobile revenues are dropping, so in the consumer market only internet access and video revenues are still growing.

IDC believes that the growth rate will accelerate to 1.6 percent in 2018, bringing worldwide spending on telecom and pay TV services to $1,689 billion.

For the period 2018 to 2022, the compound annual growth rate (CAGR) is estimated at 1.1 percent, IDC argues.

Global Regional Services 2017 Revenue 2018-2022 (revenues in $US billions)
Global Region
2017 Revenue
CAGR 2018-2022
Grand Total

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