Operators Exit Calamitous 2020 Unscathed - SDxCentral

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The buoyancy of network operators’ financial performance was tested and reaffirmed throughout the COVID-19 crisis in 2020, according to Analysys Mason.

The telecommunications sector, which is “typically resilient during a crisis, as we saw in 2008,” proved itself to be “even more critical in keeping the economy going” amid the global pandemic, the research firm concluded in a new report. “Indeed, operators performed better than the broader economy in almost all cases,” the firm wrote.

Because the industry suffered limited damage during 2020, few carriers have made significant changes to their strategy. But some aspects of the sector have been significantly impacted by the pandemic and operators may have to rethink important parts of their strategies as a result, the firm wrote.

Operator Profitability ‘Almost Identical’ to 2019

The pandemic, which is expected to continue through much of 2021, has affected network operators in three categories, according to Analysys Mason: short-term impacts, trends accelerated by the pandemic, and disruptive trends. Meanwhile, the profitability of nine global operators reviewed by the firm in 2020, was effectively unchanged and “almost identical to that in 2019,” the analysts wrote.

“Many parts of the operator business have carried on much as before,” but device sales, roaming, prepaid mobile, and content revenue declined due to the pandemic, according to the firm. Revenues tied to these lines of business were significantly impacted in 2020, but the firm expect these declines to be short-lived and eventually recover after the pandemic ends.

Meanwhile, five key trends that existed before 2020, and accelerated in response to the pandemic, will require more strategic maneuvering by carriers that want to fully benefit. These trends include a broader adoption of digital channels, growing consumption of online entertainment, the convergence of fixed and mobile broadband, unified communications and collaboration tools for businesses, and business cloud services.

“Operators’ cloud revenue is growing quickly, but may not be scaling at the same rate as the market opportunity,” the firm concluded.

Four Disruptive Long-Term Trends

Analysys Mason also identified four disruptive trends that were initiated by the COVID-19 outbreak. These trends present operators with new opportunities, but the firm warns that some may struggle to respond until new systems are implemented to capitalize on these changes. 

A shift in consumer spending patterns requires operators to develop more flexible and on-demand services without the long-term commitments operators typically demand of their customers. Moreover, business spending on telecommunications services is a growing problem for operators and the outlook for enterprise spending at operators is uncertain, according to Analysys Mason. 

The abrupt transition to remote working by most enterprises has also accelerated adoption of cloud services and changes the nature of the opportunity for operators, the firm added. “Pre-pandemic, the focus for many was on providing connectivity to business sites such as offices. This focus needs to change,” it wrote.

Analysys Mason also highlighted the large scale adoption of virtual services for entertainment, health care, and education as an area for operators to pursue with more vigor.

“The overall impact of the pandemic on operators has been relatively limited,” the firm concluded. Most operators experienced slight declines in revenue growth and flat profit margins, but much of their business was unaffected by the COVID-19 crisis.

“However, operators should not ignore the areas where the pandemic will have a more significant longer-term impact,” it wrote. “For some of the services offered by operators, business services in particular, these assumptions look outdated and may need a rethink.”

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