Energy Costs Will Push Telecom Operators to Raise Prices

Global expenditure on telecommunications and pay TV services is projected to reach $1,585 billion in 2026, representing a year-on-year increase of 2.3%, according to IDC. This updated forecast is slightly more optimistic than the analysis released earlier this year, projecting a 0.5 percentage point increase in total market valuation.

Accelerating inflation serves as the primary driver behind this projection. Energy costs are anticipated to remain elevated due to ongoing geopolitical conflicts in the Middle East and Ukraine, subsequently increasing operational expenses for telecom providers. To safeguard profit margins, operators are likely to implement tariff increases. Given that providers in many jurisdictions require regulatory approval for pricing adjustments, the impact on market growth will manifest across the remainder of 2026 and 2027. However, inflation does not represent organic growth, as this increase is strictly nominal. Historical growth metrics have frequently trailed official annual inflation rates, suggesting the market is contracting in real terms.

The regional outlook is expected to vary significantly. The aforementioned scenario is most probable within Europe and North America, where higher purchasing power results in lower price elasticity. In these regions, fewer consumers are likely to downgrade to entry-level packages or discontinue essential services. Conversely, in Africa and parts of the Asia-Pacific region where purchasing power is more constrained, price hikes will likely drive customers toward more affordable plans or low-cost providers. Consequently, nominal revenue expansion will lag behind headline tariff increases. While Africa is categorized within the EMEA region, its slower growth will be largely obscured by the higher growth rates reported for Europe.

An evaluation of the connectivity sector by service type indicates that established trends will persist despite revised top-line forecasts. Mobile remains the dominant segment, as growth in data consumption and M2M applications offsets the decline in voice and messaging revenue. Spending on fixed voice is expected to decrease as legacy TDM revenues diminish rapidly, with IP voice growth insufficient to compensate. The traditional pay TV sector will also decline as Video on Demand (VoD) and over-the-top (OTT) services gain popularity. Fixed data services will continue to expand, driven by the requirement for high-bandwidth connectivity.

Expansion in the fixed data segment will be further supported by the increasing adoption of LEO satellite broadband. However, the impact of this technology remains constrained by two factors. First, LEO broadband is concentrated among a few entities, such as Starlink and Amazon Leo. Second, these providers primarily target rural households, maritime and aviation sectors, and enterprise or government clients requiring resilient secondary links.

Recently, a separate model of satellite connectivity has emerged with significantly higher growth potential. Direct-to-device (D2D) services, including direct-to-cell and satellite IoT, are based on strategic partnerships between satellite firms and mobile operators. These alliances allow operators to utilize satellite coverage to differentiate their service offerings and extend reach to remote areas. This dynamic distinguishes D2D from LEO broadband; while telecom operators are often sidelined in the LEO space, they are central participants in D2D as they maintain the primary customer relationship.

“The future of global connectivity will be defined not by a competition between terrestrial and orbital systems, but by the seamless integration of both,” stated Kresimir Alic, research director at IDC. “Operators that view satellites as an extension of their terrestrial networks will be better positioned to enhance customer retention, protect revenue streams, and provide connectivity to the next billion users.”