IDC Telecom Services Tracker Finds the Market Growth is Speeding Up as the Effects of Inflation are Becoming Visible in All Global Regions

NEEDHAM, Mass. – Worldwide spending on Telecom Services and Pay TV Services reached $1,478 billion in 2022, increasing by 2.2% year over year, according to the International Data Corporation (IDC)Worldwide Semiannual Telecom Services Tracker. IDC expects Worldwide spending on Telecom and Pay TV services will increase by 2.0% next year and reach a total of $1,541 billion. The latest forecast is slightly more optimistic compared to the version published in November last year as it assumes a 0.3 percentage point higher growth in 2023. IDC believes this acceleration is a consequence of the increase in tariffs of telecommunication services fueled by inflation.

This is the second time in the last six months that we have increased our forecast for the telecom services market and positive adjustments have been made for all global regions. This confirms the thesis that inflation is equally happening in all parts of the world and that operators are all behaving in similar way when their profitability is threatened by the inflationary pressures. And what is more, the effects that we observe now are the outcome of the initial tariff adjustments that were generally happening in mid-2022. According to the latest IMF forecasts, inflation is here to stay for the next three years at least which means that operators will continue to increase tariffs, clients will be paying more for telco services, and the total nominal value of the market will be growing at faster pace. This is the explanation for why we increased our forecast not only for 2023, but for the entire first half of the forecast period.

Our forecast for Asia-Pacific was boosted by 0.7 percentage points, for Americas by 0.3 percentage points, and for EMEA by 0.1 percentage points. At the first sight, the magnitude of change in EMEA, region that is witnessing a higher-than-average inflation while struggling to find a replacement for the cheap Russian energy, might seem relatively low. It can be explained by 1) the war in Ukraine and the related economic sanctions imposed to Russia, the biggest market of the CEE subregion, and 2) significant slowdown of the major WE economies driven by the drastic growth of the central banks' interest rates. The fact that during the previous update the EMEA region witnessed the highest upward revision should also be taken into consideration. Nonetheless, the fastest growth this year, as well as in the entire forecast period, is expected in the Asia/Pacific region, fueled by the relatively lower saturation of the markets in less-developed countries.

High inflation is not good news for any market, because the positive boost it produces is only nominal. A closer look at the forecasted growth rates reveals that they are much lower than the annual inflation rates published by monetary statisticians, which means that the market is witnessing a decline in value in real terms. For that reason, the telecom operators continue to heavily invest into advanced telco technologies. They hope that the migration to all-IP and new-generation access (NGA) broadband will help offset the fixed and mobile voice decline. They also believe that 5G will unlock new opportunities by allowing massive machine-type communications and ultra-reliable low-latency communications.

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The companies are also increasing the pace of digitalization and software-ization of their business processes, create new go-to-market strategies based on data and intelligence, and deploy innovative business models based on telco-as-a-platform and co-creation within ecosystems. They also look for additional revenue streams in the non-telco areas such as IoT, data center, cloud, AR/VR, IT services, VoD, enterprise vertical solutions, financial solutions, cyber security, digital media, e-commerce, etc.

“Telecom operators are completely transforming - from providers of traditional commodity-style services they are becoming modern all-round full-stack technology suppliers," says Kresimir Alic, Research Director, Worldwide Telecom Services. "In that way they become leaders of the digital transformation revolution and rightly hope they can acquire one of the central positions in the new digitalized world."