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 through the pandemic, with low-single-digit declines or growth in sales for a majority of companies, as well as global sales growth estimated at +1%.
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. 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, have benefited from a recovery of advertising spending and the progressive reopenening of theatres.
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 roll-out of mobile broadband as well as additional services (banking etc.) are the main growth drivers. Local markets were comparatively hit harder by the pandemic because of their greater reliance on pre-paid plans, which customers are generally more prone to cut.
Across countries, we observe growing tensions between telecom companies and dominant video-streaming platforms, the former accusing the latter of concentrating a large and growing share of web traffic while making little to no contribution to the upgrade and maintenance of the telecom infrastructure. While regulators have so far been promoters of so-called net neutrality, the exponential growth of digital content distribution may call for a change of rules that would be beneficial to telecom companies.
The global IT services and software industry generated about USD1,790bn in sales in 2021, up +12% from 2020. The sector has benefited from the improvement of the wider macroeconomic environment and the necessity for businesses and administrations to adapt to a more IT-driven post-Covid environment. From a sector point of view, healthcare, government and retail clients have significantly increased their investment to accelerate significantly their transitions to digital solutions. Across sectors, mobility, security and automation solutions are seeing the strongest increase in demand.
Looking forward to 2022, we anticipate the risk environment to remain generally favorable:
- Spending on IT services and software will remain strong and should grow by a high-single-digit rate, according to Gartner.
- Labor shortages may put a lid on growth potential while increasing labor costs.