TELECOM

The telecommunications services industry is a USD2,000bn business made of strongly regulated national markets dominated by a handful of companies, with only a few truly international players. The industry has proven broadly resilient in 2020, with low single digit declines or growth in sales for a majority of companies, as well as global sales growth estimated at +1%. While the industry as a whole has historically been resilient through times of economic hardship, 2020 has been a reminder that the industry is not entirely risk-free. Satellite telecommunications or emerging economy companies with debt labelled in dollars, in particular, deserve close scrutiny.

In advanced economies, the telecommunications market is largely saturated, with fixed-broad penetration standing at about 30-40 subscriptions per 100 inhabitants and mobile penetration generally far above 100 subscriptions per 100 inhabitants. The rollout of fiber networks is the main driver of growth for fixed telecommunications, while large-scale commercial 5G services is also starting to rekindle growth in mobile telecommunications in many large countries in Asia-Pacific. As of Q2 2021, 5G penetration was at around 20% in South Korea and China. Market maturity has generally made competition a negative-sum game, with telecommunications companies cutting rates to lure customers from competitors. Companies present both in telecommunications and the media, especially in North America, are benefiting from a recovery of advertising spending and the progressive reopenening of theatres in countries where the pandemic is in check.

In emerging economies, mobile telecommunications dominate the market and penetration is already high across most regions (80 subscriptions per 100 inhabitants in Sub-Saharan Africa, 87 in South Asia, 100 in Latin America). The rollout of mobile broadband as well as additional services (banking etc.) are the main growth drivers. 2020 saw lower growth due to the global economic slowdown and the greater reliance of local companies on pre-paid plans, which customers are generally more prone to cut. However 2021 is seeing growth accelerating on the back of an improving macroeconomic environment.