Telecoms revenues witnessed a 3.5 percent decline during the first quarter of 2023, amounting to $448.3 billion, according to MTN Consulting.
This marked the sixth consecutive quarterly slump, but the rate of decline showed signs of slowing down, as the previous three quarters had more substantial decreases. The recovery in the latest quarter was primarily driven by China’s big three telecoms – China Mobile, China Telecom, and China Unicom – all of whom bounced back from the previous quarter’s topline declines.
Despite this improvement, the annualized revenue for the 1Q23 period recorded a significant 6.3 percent decrease compared to the previous year. This drop represented the steepest decline in a 12-month period since at least 2011 and was attributed to various factors, including currency fluctuations, inflationary pressures, and AT&T’s spinoff of its WarnerMedia unit in April 2022. The Japanese market, in particular, was hit hard, with Softbank, KDDI, and NTT experiencing substantial declines in revenues.
Among the top 20 telecoms based on annualized 1Q23 revenues, Airtel stood out as the only one with double-digit revenue growth (10.4 percent). The growth was fueled by rising average revenue per user (ARPU) and increasing service subscriptions in its domestic market, along with the transition to 5G technology.
Other telecoms in the top 20 that experienced revenue growth in the same period included Saudi Telecom, Charter Communications, and various Chinese operators, whose growth was driven by their emerging businesses in cloud computing, big data, internet data centers, and IoT.
Despite the hope that 5G-enabled devices would generate new revenue streams, experts doubt this possibility. As a result, telecoms are expected to undergo significant strategic changes and cost transformation programs in the near future to improve their financial positions.
On the investment front, capital expenditure (Capex) showed a modest recovery in 1Q23, growing by 0.8 percent to reach $77.7 billion. However, annualized Capex declined 1.5 percent, reaching $322.6 billion for the 1Q23 period. Despite the decline in annualized Capex, capital intensity reached a record high of 18.3 percent, indicating a higher level of investment relative to revenues. Increased fiber roll-out, 5G expansion, and upgrade activities were significant drivers of this capital intensity growth.
Digital transformation and technology-enabled solutions have played a vital role in managing costs and maintaining stable profitability margins for telecoms. EBITDA margins for the industry were at 34.5 percent, while EBIT margins stood at 15.2 percent for the annualized 1Q23 period. To optimize cost structures and ensure sustained profitability, telecoms are expected to focus on automation, core network sharing, network slicing, and partnerships with webscale cloud providers.
In response to stagnating revenues and macro pressures, telecoms have reduced their workforce through automation, attrition, and voluntary retirement schemes. The industry headcount fell to 4.55 million in 1Q23, with further reductions expected to reach 4.122 million by 2027. Labor costs per employee have seen a slight decrease, but experts forecast a steady increase in the coming years due to exchange rate volatility.
Asia overtook the Americas as the region with the highest telecoms revenues in 1Q23, while the Americas continued to outspend all other regions in terms of capex. European telecoms maintained the highest regional capital intensity, followed closely by the Americas and the MEA regions.
As telecoms continue to face challenges in revenue generation, cost management, and technological advancements, the industry is poised for significant changes and transformations in the foreseeable future.
