5G on the ropes as Covid-19 set to land $51bn blow on global mobile services industry

Research predicts mobile revenue will drop 4.1% worldwide because of pandemic, with European operators taking a particular heavy hit

A study from analyst Omdia has presented a bleak near-term future for the telecoms industry amid the Covid-19 crisis, with annual mobile services revenue forecast to drop by 4.1% at the end of this year, compared with the end of 2019.

Even though mobile services are part of critical infrastructure, they are not immune to the shock of the pandemic, said Omdia, and if its latest forecast is realised, it would mean that worldwide mobile communications services market revenue will total $749.7bn at the end of 2020, $51bn less than was predicted for the industry earlier this year. The final revenue for 2019 was $781.5bn.

“Mobile phone companies around the world are experiencing usage spikes as more countries encourage or enforce social distancing and work-from-home rules to slow the spread of Covid-19,” said Mike Roberts, research director at Omdia. “However, the spikes aren’t enough to overcome the impact of the pandemic on consumer behaviour. These rules are having a dramatic impact on various regions of the world, halting new subscriptions and upgrades in the US, while slashing revenue for operators in Europe.”

Omdia predicts that Europe will suffer the biggest impact of the crisis, with mobile service revenue falling 9.1% to $131bn, representing a downgrade of 9.3% from Omdia’s previous forecast. This decline is likely to be driven by significant reductions in mobile prepaid revenue and a dramatic drop in inbound roaming revenue.

The analyst cited as a key example Vodafone UK, for which mobile internet traffic has increased by 30% and mobile voice traffic by 42% because of the crisis. At the same time, mobile service providers are seeing new business grind to a halt as retail stores close and consumers stop buying new phones as job losses mount.

Another example of the latter widespread trend is AT&T, which is closing 40% of its retail stores in the US, which, the study says, will bear the brunt of mobile service revenue losses in the Americas, set to decline by 3.7% to $237bn in 2020. Most of the losses will be from net additions and upgrades to higher data plans slowing or stopping altogether in the US.

The Middle East and Africa region is set to see a 3.9% decline in mobile service revenues to $84bn – a downgrade of 8.4% from Omdia’s previous forecast.

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Major factors cited for the imminent decline include the impact of low oil prices on Gulf economies and the fragility of economies and healthcare systems in parts of Africa. The high-income Gulf countries have been early movers with 5G in the Middle East and globally, all having launched commercial 5G services in the second half of 2019, and the economic impact of the crisis is likely to hit consumer confidence and appetite for expensive 5G devices.

As a result, mobile 5G subscriptions in the Middle East will be significantly lower than expected at the end of 2020. Even before the Covid-19 crisis, the number of mobile 5G subscriptions in Africa was expected to be very small at the year-end. Now it will be even lower because of the economic consequences of the pandemic and likely disruption to 5G network deployment plans.

This will also be the case around the world, not only because of the economic situation, but also the possibility of delays in 5G network deployment and in the availability of 5G devices. Overall, Omdia believes 5G worldwide subscriptions will be down 22.1% on its previous forecast.

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