IDC forecasts flat telecom spending this year

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Research firm IDC predicts that telecommunications services spending will be about the same as it was last year, due to the mixed impacts of the coronavirus pandemic.

IDC expects telecommunication services spending to hit $1.6 billion in 2020, which is nearly flat compared to last year. The outlook could surely be worse, and the telecom segment may get off lightly compared to more hard-hit sectors such as travel and consumer retail.

In terms of direct impact from the COVID-19 pandemic, IDC said that the industry is seeing some increase in use of services due to national lock-downs, but that doesn’t necessarily equate to an increase in revenues for service providers.

“On the positive side, IDC has observed increased use of telecom services due either to nationwide lockdown or work-from-home policies that many companies have implemented for their employees to follow,” the firm reported. “However, this doesn’t directly translate into a surge in telecom spending due to many households having unlimited voice calls and unlimited Internet services.” On the commercial telecom services side, IDC added, spending will be inhibited due to the pandemic’s economic impacts across various industries, with businesses either facing temporary shutdowns or being closed altogether.

In the second half of 2020, the firm added, the reduction in GDP growth will impact the market, as will the “continued transition to IP and cloud services with lower ARPU.”

When it comes to mobile services specifically, IDC said that there will be negative impacts such as slower net additions, because retail outlets are closed and that makes it more difficult to activate new devices and plans for customers.

“COVID-19 is leading to a lot of uncertainty around the spending impact on various technology markets. We expect the telecom services market to weather the current conditions better than other elements of the ICT market,” said Carrie MacGillivray, group vice president and general manager, Worldwide Telecom, Mobility, and IoT research at IDC. “The COVID-19 pandemic is highlighting the importance of connectedness. Telecom services are the common thread keeping us united as we weather this crisis.”

A new report from Analysys Mason predicts a downturn in telecom revenues, however, forecasting a drop of 3.4% across developed markets this year. While consumer services, which make up about 68% of telecom revenues, will be “relatively resilient” during the downturn, the firm said, “large increases in unemployment, business closures and the overall decrease in economic activity will cause a sharp decline in business services revenue.” Before the pandemic, Analysys Mason had expected an increase of 0.7% in revenues compared to 2019, and it expects industry revenues to return to growth in 2021, with revenues up 0.8% driven by “pent-up demand in consumer broadband.” Generally, the company added, “capex will rebound quickly, but 5G capex recovery will be slower in Europe than elsewhere. The pandemic will reinforce and accelerate existing opex trends rather than introduce new ones.”