Global Telecoms Infrastructure in a Recession — What Might Happen?
Here at Delmec, we’re always looking to the future. The world of global telecommunications moves fast, and it’s important that we’re prepared for every eventuality. This week, our board has been focused on one big question: how will the predicted recession affect global telecoms infrastructure rollout and investment?
It’ll come as no surprise to those of us in the field that the demand for network expansion remains strong. A recent Gartner report indicated that general investment in digital transformation will continue, particularly in the areas of cloud computing, artificial intelligence, automation, and the internet of things (IOT). Media headlines appear to confirm this stance, with CNBC reporting that “Despite recession fears, companies aren’t pulling back on technology investments” with tech leaders understanding “that technology is not a cost center (sic), but rather a business driver.”
Nokia and Ericsson seem to be on the same page, as they’ve budgeted to continue their 5G rollout. The push for network expansion and improvement comes not just from the public, but also from funders whose tech investments require more capacity. That said, the recession will likely result in less spend, which will mean a slowing-down of rollout.
The development of sustainable projects, cloud-based networks and open RAN is expected to progress, with Omdia forecasting total telecoms revenue (including mobile and fixed broadband services), to grow “from $1.1tn in 2021 to $1.3tn in 2027 at a CAGR of 2.2%.” However, there may be an adjustment in store if the recession’s effects are felt sooner rather than later.
MNOs are likely to be affected more so than towercos because of pressure on ARPUs as consumers tighten their collective belts. For example, people will look to save money, Omdia analysts say, by “shifting to lower tariffs, sacrificing their mobile data allowance, and using Wi-Fi instead.” The knock-on effect, of course, will be a serious demand for more cost-effective networks.
So what does this mean for businesses like Delmec? Well, there will be challenges for sure, particularly with reduced revenue levels and increased pressure for cost and carbon savings. Some of our clients will feel these changes more acutely than others, and the earlier they begin to prepare, the better. This is where our superior portfolio management services are of particular benefit, as are our data-collection and analysis skills. The old adage that information is power may become truer than ever as we all look to find new ways to curb costs while continuing to progress as an industry.
Commentators are expecting developing markets to be hit harder by this recession, but our instinct — based on decades of experience in these territories — is that their telecommunications sectors will be more resilient than predicted. With this in mind, we’re working closely with affected clients to make sure they’re in the strongest possible position going into these uncertain times.
As always, there will be some silver linings ahead too. The ever-increasing focus on sustainable products and services is likely to bring market stimulation in the form of investment, innovation, and activity. The continued drive towards Open RAN technology is helping to break down barriers, making progress more affordable and accessible to the smaller players.
Funding and managing this in straitened circumstances may lead to new pressure to adopt more netco models, which Deloitte says are “regarded as low-risk businesses that will generate steady cash flows over long periods by leasing their infrastructure to service providers.”
Overall, we’re confident here in Delmec that there’ll still be plenty of potential to grow in this market. We’ll all just need to be more shrewd in what we choose to do. If we do enter a recessionary period as expected, it won’t be the first for our 50-year-old company. We’ll weather this storm too, by working together with our clients to make sure that synergy shapes success, no matter how tough the economic environment might get.