2021 was characterised by the quick recovery of the global economy from the slump caused by the COVID-19 pandemic. This favourable environment resulted in additional spending growth on telecommunications services. Telecom services and Pay TV services reached US$1.566 billion in 2021, up 1.6% year over year. Asia/Pacific recorded a dismal 0.5% growth according to IDC.
IDC's October 2021 forecast for the worldwide Telecom Services and Pay TV market included a scenario of further recovery (i.e., even higher growth rates) in the years 2022 and 2023.
However, because of new circumstances that include accelerated inflation and the raising of benchmark interest rates by the central banks that will consequently lead to slower economic growth in the years to come, the forecast has been changed.
The new forecast of 1.4% growth (about US$1,588 billion) is still optimistic, but the growth rates in its first half will be lower than what was recorded last year.
Inflation
Inflation should nominally have a positive impact on this market. IDC predicts operators will be increasing their tariffs, clients will be paying more, and the total value of the market should be growing faster than previously expected.
However, inflation also generates a deterioration of consumers' and businesses' purchasing power, thus causing a decrease in demand. It is to be noted that the impact of inflation in the telco services market will be stretched over the next several years.
This is because a high proportion of users have two-year contracts with operators that guarantee stable fees until their contracts expire. That also means that the effects of inflation will initially be higher in the markets with a higher proportion of prepaid customers.
Ukraine-Russia war
IDC says the economic impact of the war in Ukraine will be mostly confined to EMEA. Ukraine will take much of the brunt following the destruction of its network infrastructure and the departure of many of its citizens.
Russia will also see a decline as local demand will be under pressure due to the recession caused by international sanctions. IDC, however, believes that the war will positively impact the markets of neighbouring countries (Poland, Slovakia, and Romania) that are hosting large numbers of Ukrainian refugees.
COVID-19
The current lockdowns in China and the possible emergence of new variants of the virus in the rest of the world might bring additional impacts to the market, primarily in the business fixed data services section.
Although the previous waves of COVID did not drastically affect the global market for telecom services, the related global supply-chain disruptions are already causing shortages of end-user and network equipment and thus creating new concerns for supply-side participants.
The telecom services industry has remained very stable throughout the COVID-19 pandemic. More than that, it acted as a backbone of the global economy, allowing people to communicate, entertain, and do their jobs while being confined to their homes.
"The economic recovery in 2021 has boosted the growth of the market and resulted in higher-than-expected growth rates, but the same forces that pulled the market up can also push it down," said Kresimir Alic, research director, Worldwide Telecom Services at IDC.
He opined that this market is not immune to changes in economic trends and forces such as inflation and recession might quickly change the shape of the curve. "The inflation is already happening, and the economies have started to slow down – for that reason our view of the market remains cautiously optimistic," he added.
