Between 2023 and 2025, telecom has experienced a period of consolidation marked by a broad-based expansion of fiber and 5G networks in North America, Europe and some top Asian economies like China, South Korea and Japan. But despite strong investments by telecom carriers, this has not yet translated into the balance sheet, given a strong deficit in the uptake in some mature markets (1/3 of EU27+UK households still did not have access to fiber in 2024) but also a slow monetization of 5G technology as tough competition hampers pricing power. After a mild +3% over the past three years, the growth rate is expected to more than double and reach 7% on average over the next three years under the impulse of stronger returns from 5G investment as the user volume is expected to outpace 4G users by 2026 and become broadly dominant by 2030. A stronger push from both public and private investors in favor of a deeper digitalization and connectivity of business applications and equipment in diverse sectors such energy, mining, logistics, transportation and agriculture will also paint a brighter picture for the industry in the short/mid run.
Asia-Pacific is expected to keep its role of the growth locomotive, with an over +10% CAGR of revenue expected over the next three years, consolidating its dominant position (42% market share estimated in 2028). China and South Korea (+12% three-year CAGR for both) are both expected to drive the revenue upside in the region, thanks to the support of their internationally renowned mobile equipment specialists. Under the impulse of the Asian market, the market share of telecom services in emerging countries is expected to outpace the share of developed markets for the first time by 2028. Beyond Asia, we also see strong growth potential in Africa (+9%) and the Middle East (+10%) as fiber connections and the 5G network are not as well developed.
While the development of wireless networks is expected to continue under the impulse of a stronger demand for robots, remote applications and IoT devices, telecom companies are facing new external competition from tech blue chips that are splurging to build up their own networks of data centers and cloud infrastructure to support the ongoing transition toward an AI-powered economy. There is a double opportunity for telecom carriers to take part in the AI boom via the higher demand for high-speed connectivity solutions but also the urgent need to upgrade the grid network to cope with increasing power consumption.
Though high fragmentation and tight competition weighed on the industry during the recent period of high inflation and interest rates, they did not reverberate negatively on corporate leverage, which remained steady. Improving double-digit margins, driven by higher revenue growth and declining interest rates, could trigger a rise of capex to fund 6G and space connectivity projects, as well as potentially some takeover offers, though regulators in Europe and the US have been reluctant to support mergers within the telecom industry in the recent past.
