Global Telecoms Relatively Slow Despite 5G Rollout
The Global Telecom Outlook 2024-2028 shows that the telecom sector’s total service revenue across fixed and mobile rose by 4.3% in 2023 to US$1.14 trillion. As shown in the chart, global industry revenues will rise at a compound annual growth rate (CAGR) of only 2.9% through 2028, below the projected of rate of inflation, at which point total revenues will edge up to US$1.3 trillion.
According to a report by PwC stressed that telecoms industry continues to face a fundamental challenge: its core products and services are becoming commodities, meaning it has difficulty raising prices, while it faces a continual need to invest in infrastructure. But even in industries with relatively slow growth, there are always niches of expansion and opportunities for companies to improve their bottom lines.
On projection, the report says, by 2028, there will be an additional US$200 billion in incremental revenue growth up for grabs across the sector. Nonetheless, the picture puts even more pressure on players in the telecommunications ecosystem to find new ways of creating value from existing revenue flows.
We stand at the beginning of a sweeping reconfiguration of legacy industries. A combination of myriad immediate crises and five long-term megatrends is causing long-established industry structures to break down, and triggering the formation of new domains of growth centered around human needs: How we feed. How we move. How we build. How we make. How we fuel and power. And how we care. These diverse ecosystems share a key attribute: they’ll be enabled, connected, and underpinned by technology—not least by digital connectivity. However, telcos play a pivotal role, providing the glue that binds the participants together and enables them to drive their individual and collective growth.
Therefore, these transformations will create a greater demand for connectivity and communications services in the coming years. Under the influence of key megatrends, the telco industry is itself undergoing a sweeping reconfiguration, which is opening up many new opportunities. The forecasts and insights of the Global Telecom Outlook provide a guide to the ingredients for growth. These include strategic investments in AI, fixed connectivity, and B2B service; working with investors and regulators to create opportunities to optimize market structure; and deploying deals to build scale.
Sluggish global growth in overall revenues masks wide variations between different services and at the national and regional levels. Between 2023 and 2028 revenue from fixed broadband, mobile subscriptions, and fixed voice subscriptions will grow at projected CAGRs of 3.8%, 4.3%, and decrease by –1.8%, respectively. Even wider disparities emerge at the country level. The chart below maps telecoms service revenue by country in 2024, for both fixed (combining broadband and voice) and mobile, against the five-year CAGR for the relevant segment in each market. In fixed telecoms, most countries are grouped around the 0 to 6% CAGR range, including the US and China. But a few outliers show much higher growth—notably India, Nigeria, Egypt, and Kenya. Meanwhile, mature markets such as Japan and Switzerland exhibit negative CAGRs. Similar—albeit generally smaller—divergences emerge in mobile. The vast majority are again grouped in the 0 to 6% CAGR range. The revenue growth leader in mobile is Colombia, with a CAGR of 10.5%, closely followed by India and Argentina.
There are two potential contributors to growth – a rise in the sheer number of subscribers, and the ability to reap more annual revenues from each subscriber. Generally speaking, in both developed and developing countries, raw subscriber growth accounts for most of the new value, with average revenue per user (ARPU) generally growing at a slower pace in developing economies, and even declining in mature, highly competitive markets. Telecoms service ARPU will continue to decline over the next five years, with mobile ARPU falling at a CAGR of –1.3%, and fixed broadband ARPU essentially flat at a CAGR of –0.1%. Fixed voice ARPU will see a stronger decline at a CAGR of –4.7%. In fixed services, India’s rapid growth in service revenues is being driven by headlong subscriber growth at a CAGR of 17.2%, coupled with an ARPU CAGR of just 0.9%. In Nigeria, fixed-line ARPU is projected to decline at a CAGR of –1.4%, while subscriber numbers rise at a CAGR of 9.8%. In mobile in the US, subscribers are growing at a healthy 4.9% CAGR, while ARPU is falling at –1.5% CAGR.
The Upshot
The industry is currently in a situation where almost all the cash it generates is absorbed by capital expenditures, dividends, and servicing debt—leaving very little for investment in innovation or enhanced customer experience.
One opportunity for value creation lies in the business-to-consumer (B2C) services segment. PwC research shows that fixed communications services have become commoditised or are “on the edge” of commoditization in 34% of countries, with global population–weighted average revenue per account (ARPA) declining by 21% in the past seven years. Despite the rollout of 5G, a similar trend toward commoditization is also underway in mobile. As they confront such trends, telecoms have a powerful new tool in AI, especially GenAI. Deploying AI effectively can help take cost and friction out of the B2C business, protect margins, and improve the customer experience through AI-enabled personalization at scale, while also rapidly becoming the industry norm in network management.
The telecom industry can find new pockets of revenues and value creation amid challenging headwinds.
