Global Telecommunications Network Operators Market Review Q2 2020: Capex Drops to 10-Year Low, Revenues Sink Amidst Spread of COVID-19 Pandemic

Dublin, Sept. 28, 2020 (GLOBE NEWSWIRE) -- The "Telecommunications Network Operators: 2Q20 Market Review" report has been added to *ResearchAndMarkets.com's* offering.This market review provides a comprehensive assessment of the global telecommunications industry based on financial results through June 2020 (2Q20). The report tracks revenue, capex and employee for 138 individual telecommunications network operators (TNOs). For a sub-group of 50 large TNOs, the report also assesses labor cost, opex and operating profit trends. The report also covers annual data for other financial metrics such as debt, cash & short term investments, M&A spend and cash flow from operations for the TNO-50. The coverage timeframe spans 1Q11-2Q20 (38 quarters).The global telecom market saw YoY declines in both revenue and capex in 2Q20, for the second consecutive quarter. Lower revenues from roaming, advertising, and equipment sales contributed to a 5.4% YoY reduction, bringing overall market revenue to $427B in 2Q20. Exchange rate volatility also contributed to the decline. The pressure was felt more for telcos with exposure to Brazil, Argentina, Mexico and Chile. Revenue in USD fell on average by 28% YoY in 2Q20 for these LATAM markets.

Telco capex also mirrored the declining revenue trend, as it slid 6.2% YoY and touched $65.5B in 2Q20. Annualized capital intensity remained at 16.0%, the same level as 4Q19 and 1Q20; no 5G spending splurge is in sight. Barriers to capex spending include macroeconomic strain, a need to conserve cash, Chinese vendor risk, and uncertainties around how telcos will monetize 5G. Telcos also held back on discretionary spending due to future enterprise spend worries. Looking ahead, TNOs are likely to revisit their capex budgets and slash spending on 5G.

*Key findings from review of the data in 2Q20 include:*

*1) Revenues:* Global telecom revenues in 2Q20 were $427B, down 5.4% from 2Q19. There are multiple reasons for this decline: a decrease in handset sales due to the closure of retail stores and supply chain disruptions and a decline in roaming revenues arising from global travel restrictions. Mobile handset production also has been under pressure from the supply side, due to a shortage in components and stalling of related supply chains caused by labor shortages and logistic disruptions. On a regional basis, the YoY revenues in 2Q20 fell across all the four regions, most notably in Americas (8%), followed by Europe (5%), MEA (4%) and Asia (2%). Though operators worldwide have tried to balance the impact from reduced prepaid and roaming revenues with uptake of higher fixed internet services and post-paid usage, the top-line growth continued to fall steeply due to the overall decline in economic activity.

*2) Capex:* Overall capex declined by 6.2% YoY to $65.5 billion in 2Q20. The industry's annualized capex to revenue ratio was 16% in 2Q20, compared to 16.5% a year ago, as telcos prioritized their investment on maintenance and capacity upgrades rather than network coverage expansion projects. Telcos, especially in Europe, witnessed reduced capex spending as a precautionary measure to conserve cash for future spectrum auctions. By contrast, Chinese telcos are racing ahead with investments in network buildouts. The combined capex of the big three telcos in China reached $24B in 1H20, up 15% YoY. China's preparation for 5G is well underway: the country began 2020 with ~130K 5G base stations, added 280K in 1H20, and aims to reach 600K 5G enabled base stations by end of 2020. China's progress in 5G deployment is due to a government push and has benefited key local vendor Huawei. That has come as a relief to Huawei given the spread of bans on its participation in 5G networks in a number of European and Asian markets.

*3) Employees:* Telcos employed 5.1M people in 2Q20, down 2% YoY. Global telco headcount has been relatively stable for several years, due in part to growth in Asia, but the 2020 recession could change this. In India, government-owned telecom players BSNL and MTNL slashed their headcount by 54K in 2Q20 compared to a year ago. In the US, the combined headcount of AT&T and Verizon declined by over 4% YoY in 2Q20. M&A deals also often result in workforce redundancies as there is a natural overlap of job roles, for example, T-Mobile's integration with Sprint will also result in headcount reduction. The pandemic situation has put customer service jobs at risk as telcos are investing in chatbots and other AI-enabled voice-based systems to cut costs. On the retail front, layoffs are on this rise with consumers opting for online purchases.

*4) Revenue & labor costs per employee:* On a revenue per employee (RPE) basis, the telco sector has been stagnant since 2011: the annualized figure was $363K that year, and the average figure for the last four quarters was $347K. By contrast, annualized RPE in the webscale sector exceeded $526K in 2Q20. Telco labor costs per employee, on an annualized basis, increased from $55.8K in 2Q19 to $56.1K in 2Q20.

*5) M&A:* The M&A climate continues to remain strong for the sector in 2020. Many telcos see their core markets declining and are buying their way into other markets while also streamlining their asset base. Noteworthy deals in 2Q20 include the merger of the UK-based Virgin Media (a subsidiary of Liberty Global) with O2 (owned by Telefonica), and the merger of T-Mobile and Sprint. Some telcos are also investing in companies with significant software capabilities. Verizon's acquisition of BlueJeans, a B2B video conferencing company, is one such example. Amidst consolidation, there are also some examples of small or new telcos emerging to impact broader markets, including Rakuten in Japan, Dish Network in the US, and Dito Telecommunity in the Philippines.

*6) Profitability:* Operating margins have been stable for the last 11 quarters, averaging around 13.6%, on an annualized basis. Single quarter operating margins, on an annualized basis, increased in 2Q20, to 14.1% from 13.6% in 2Q19. The rise in margins is due to a fall in opex (excl D&A) which declined by 6.8% in 2Q20 versus 2Q19. The decline in opex (excl D&A) was due to store closures and reduced spending on selling and marketing activities. EBITDA margins have been on the rise as well, with the growth recently stemming from weak capex results (which tends to reduce D&A expenses).

*Key Topics Covered:*1. Abstract
2. Market snapshot
3. Analysis
4. Key stats through 2Q20
5. Operator rankings
6. Company Drilldown & Benchmarking
7. Country breakouts
8. Regional breakouts
9. Raw Data
10. Subs & traffic
11. Exchange rates
12. Methodology & Scope
13. About*A selection of companies mentioned include:*· Airtel
· Altice USA
· America Movil
· AT&T
· Axiata
· Batelco
· BCE
· Bouygues Telecom
· BSNL
· BT
· Cable ONE, Inc.
· Cablevision
· China Mobile
· China Telecom
· China Unicom
· CK Hutchison
· Clearwire
· Cogeco
· Comcast
· DEN Networks Limited
· Deutsche Telekom
· Digi Communications
· Entel
· Etisalat
· Globe Telecom
· Grupo Clarin
· Idea Cellular Limited
· KDDI
· Leap Wireless
· Maroc Telecom
· Megafon
· Millicom
· MTN Group
· MTNL
· Omantel
· Orange
· PCCW
· PLDT
· Proximus
· Singtel
· SITI Networks Limited
· SK Telecom
· Sky plc
· Sprint
· StarHub
· Swisscom
· Taiwan Mobile
· Tata Communications
· Tele2 AB
· Telefonica
· Telenor
· Telia
· Telstra
· Telus
· Thaicom
· Time Warner
· True Corp
· Veon
· Verizon
· Virgin Media
· Vivendi
· Vodafone
· Ziggo

For more information about this report visit https://www.researchandmarkets.com/r/jxmaj0

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