Telecom Market Growth Is Speeding Up

Worldwide spending on Telecom Services and Pay TV Services reached $1,478 billion in 2022, increasing by 2.2% year over year, according to IDC. The analytics company expects Worldwide spending on Telecom and Pay TV services will increase by 2.0% next year and reach a total of $1,541 billion.

The latest forecast is slightly more optimistic compared to the version published in November last year as it assumes a 0.3 percentage point higher growth in 2023. IDC believes this acceleration is a consequence of the increase in tariffs on telecommunication services fueled by inflation. This is the second time in the last six months that IDC has increased their forecast for the telecom services market and positive adjustments were made for all global regions. This confirms the thesis that inflation is equally happening in all parts of the world and that operators are all behaving in similar ways when inflationary pressures threaten their profitability. The effects that we observe now are the outcome of the initial tariff adjustments that were generally happening in mid-2022.

The forecast for Asia-Pacific was boosted by 0.7 percentage points, for Americas by 0.3 percentage points, and for EMEA by 0.1 percentage points. At first sight, the magnitude of change in EMEA, a region that is witnessing higher-than-average inflation while struggling to find a replacement for cheap Russian energy, might seem relatively low. It can be explained by the war in Ukraine and the related economic sanctions imposed on Russia, the biggest market of the CEE subregion, and a significant slowdown of the major Western European economies driven by the drastic growth of the central banks' interest rates.

High inflation is not good news for any market, because the positive boost it produces is only nominal. A closer look at the forecasted growth rates reveals that they are much lower than the annual inflation rates published by monetary statisticians, which means that the market is witnessing a decline in value in real terms. For that reason, telecom operators continue to heavily invest in advanced telco technologies. They hope that the migration to all-IP and new-generation access (NGA) broadband will help offset the fixed and mobile voice decline. They also believe that 5G will unlock new opportunities by allowing massive machine-type communications and ultra-reliable low-latency communications.

The companies are also increasing the pace of digitalization and software-ization of their business processes, creating new go-to-market strategies based on data and intelligence, and deploying innovative business models based on telco-as-a-platform and co-creation within ecosystems. They also look for additional revenue streams in the non-telco areas such as IoT, data centers, cloud, AR/VR, IT services, VoD, enterprise vertical solutions, financial solutions, cyber security, digital media, e-commerce, etc.

“Telecom operators are completely transforming - from providers of traditional commodity-style services they are becoming modern all-round full-stack technology suppliers," said Kresimir Alic, Research Director for Worldwide Telecom Services at IDC. "In that way, they become leaders of the digital transformation revolution and rightly hope they can acquire one of the central positions in the new digitalized world.