The COVID-19 pandemic went from national to global as the first quarter drew to a close in March 2020. By the end of April, stay-at-home orders were in place in the world’s major economies. Businesses shifted priorities to comply with these orders and create remote working environments, and providers were pressed to add capacity to accommodate new network and service needs. At the same time, some enterprise network transformation projects were paused as businesses reprioritized to ensure that necessary services were in place to enable employees to continue to work.
After the initial scramble to adapt to new societal and workplace norms, how did COVID-19’s economic impact affect providers of enterprise services? In first-quarter earnings, service providers took steps to address potential challenges from the pandemic. While it was too early to estimate the impact on overall revenues and earnings, providers anticipated the immediate impact on consumers and SMBs, and many increased their quarterly bad debt allowances. Going into the second quarter, a great deal of uncertainty remained about the virus and expectations for revenue were conservative, particularly for small and midsize enterprises (SMEs) and verticals such as travel and hospitality that were especially hard hit by the pandemic. However, major providers maintained a cautiously optimistic outlook for the second half of 2020.
Second-quarter results are now proving moderate (in some cases slightly positive) rather than extreme. Providers do note revenue declines that could be attributed to COVID, including loss in revenue from SMEs and wireless roaming, and the impact of COVID-driven currency fluctuations in global markets. Some enterprises put projects on hold, delaying service orders. But overall, second-quarter earnings sound notes of cautious optimism for the remainder of the year. The expected declines from the consumer and SMB segments materialized as expected, as consumers cut spending and small businesses were forced to temporarily or permanently close. Enterprises, however, are proving to be resilient so far. As we move into the second half of 2020, service providers are reporting that some enterprise customers are accelerating digital transformation initiatives and deploying services that will help the enterprise to move forward despite COVID. Omdia’s post-COVID enterprise surveys see similar sentiments. Enterprises with fewer than 5,000 employees are generally expected to reduce IT budgets, but new network architectures companies are expected to accelerate their efforts.
While these results illustrate cautious optimism about the future, there is still much uncertainty. A global resurgence of the virus is a possibility. Some countries in Asia and Europe have begun reporting an increase in COVID-19 cases after loosening restrictions. The piecemeal strategy in the US has caused its own set of problems in containing the virus and economic fallout, while social unrest and the upcoming presidential election are additional elements adding to an already challenging environment. Businesses and network operators serving them have done better than expected so far, but global markets are nowhere near clear of the threat.
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