IDC forecasts worldwide spending on telecom services and pay TV services will increase 1.6 percent in 2025, reaching $1,535 billion.
In 2024, spending on telecom services and pay TV services reached $1,510 billion, representing a 2.2 percent increase.
The growth in spending in 2024 was significantly influenced by inflation, which led to higher tariffs. Both residential and business customers allocated more funds to telecommunications services, driven by increased costs. The impact of inflation varied across regions, influencing consumer behavior and spending patterns differently in Europe, North America, and the Asia Pacific.
Regional Analysis
Europe and North America experienced more pronounced impacts from inflation, characterized by higher purchasing power and lower pricing elasticity. Consumers in these regions were less inclined to switch to more affordable plans or discontinue services, maintaining overall spending levels.
Conversely, the Asia Pacific region recorded a slower growth rate in 2024 compared to the previous year. This deceleration is attributed to the robust post-COVID recovery seen in 2022 and 2023, which had already driven substantial spending increases. Thus, the growth in 2024 stabilized at a relatively lower rate as the market normalized.
Technological Transformation
Despite the projected slowdown in spending growth, the telecommunications sector is undergoing significant technological transformations. Key developments include:
5G Infrastructure Investments: Telecom operators are prioritizing investments in 5G networks, focusing on network densification and strategic partnerships to expand coverage.
AI Integration: Service providers are increasingly leveraging AI to enhance customer experience, streamline operations, and reduce costs. AI is being deployed to optimize network performance and facilitate predictive maintenance.
Fiber Optic and LEO Satellite Rollouts: The deployment of fiber optic networks and Low Earth Orbit (LEO) satellite services is accelerating, fostering competition and enabling broader connectivity in remote areas.
Shift to Digital Services: Telecom operators are shifting their focus from traditional connectivity services to digital solutions, utilizing cloud-native technologies, AI, and edge computing to deliver value-added services.
Tariffs and Economic Impact
A significant factor influencing the market is the set of tariffs announced by the new U.S. administration, particularly on telecommunications equipment. While the direct impact on telecom services is expected to be minimal, the indirect effects could include:
Increased Costs for Telecom Operators: Tariffs on telecom equipment may result in higher costs, potentially delaying 5G rollouts and AI projects.
Economic Implications: The potential for increased tariffs to trigger another wave of inflation could reduce consumer purchasing power and dampen telecom spending.
Mark Walker, Vice President of Worldwide Telecoms Data and Analytics at IDC, notes that while the baseline scenario assumes the tariffs in effect as of April 2024, potential delays or expansions in tariff policy could alter market dynamics.
Uncertainty
IDC’s forecast for 2025 indicates telecommunications market remains susceptible to economic uncertainties, including potential tariff escalations.
The sector’s focus on technological advancements — particularly in 5G, AI, and fiber optics — could mitigate some downside risks by enabling operators to deliver more efficient, cost-effective services, thus preserving revenue streams even amidst economic headwinds.
Baburajan Kizhakedath
