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Summary

Omdia’s World Telecoms Financial Benchmarks service tracks quarterly financial and other telco data. While COVID-19 affects most businesses and there are adverse effects, the overall impact on telecoms is less than many other business sectors, and recent guidance offers hope for both recovery and investment.

Many telcos have made only limited changes to pre-COVID financial guidance for 2020, or repeated or improved their outlook

Broad-based global economic deterioration, dominated by COVID-19, led many telcos to omit, withdraw, or reconsider forward-looking statements about their current fiscal year’s revenues, EBITDA (a measure of profitability), capex (investment), and other metrics. The typical telco COVID playbook has included negative revenue impacts in prepaid usage, loss of lucrative roaming revenues from international travel, bad debt, and lower handset or equipment sales. Profitability may also be impacted by restrictions on movement, social distancing and protective measures, and investment delayed either to preserve cash flow, or because the virus made work like network rollout more difficult.

Current expectations are often better than previously feared, with revenue shortfalls being partly offset by cost savings, boosting EBITDA. Companies with developing market operations that are largely prepaid have suffered more, as usage declines were almost immediate, As examples:

  • MTS had expected 3% revenue growth, but still believes “flat to +3%.” EBITDA is expected at “-2% to flat,” hardly a disaster.

  • Telenor expects a low-single-digit decline in revenues (previously up to 2% growth), but EBITDA is still expected to rise, albeit by less than the 2% to 4% previously cited.

  • Telekom Austria revenues are expected to be -2%, compared to +1% to +2% previously.

  • Turkey cut its revenue growth range from 13%-16% to 10%-12% (inflation is moderating) but expects a higher EBITDA margin range (40%-42%, versus 39%-42% previously).

The expected annual impact has been more limited in many richer economies: Swisscom reduced its revenue guidance by just 1%, and Orange EBITDA after leases is expected to fall just 1%. It is anticipated investment, however, which best illustrates the underlying optimism of some leading management teams. China Mobile and China Telecom both expect substantial capex increases, in the 8-10% region due to 5G (although China Unicom anticipates a decline). AT&T reiterates its intention to $20 billion in gross capital investment. BT’s reported capex for the year to March 2021 is guided to rise, from £3.96 billion to between £4.0 billion and £4.4 billion. Even in developing markets, MTN was notable for having guided to capex down 24% initially but has since cut the decline to 15%. Orange and Telekom Austria are, however, cutting capex outlooks, the latter by 25%. Companies invest for future returns, so maintaining capex forecasts signals a perceived need to expand and develop fast speed networks, often with government support and enthusiasm as a means by which to speed up economic recovery. While not immune, there are worse industries to be in.

For details of our global telecoms financial benchmarking service, please contact your Omdia representative.

Appendix

Further reading

Communications Provider Revenue & Capex Forecast: 2020–25, GLB007-000407 (July 2020)

World Telecoms Financial Benchmarks – Group Guidance Tracker, PT0016-000004 (June 2020)

Communications Provider Revenue & Capex Highlights: 1Q20, GLB007-000412 (July 2020)

Telecoms Industry and Operator Benchmarks by Key Financial Metrics: 1Q20, PT0016-000015 (July 2020)

Author

Upin Dattani, CFA, Head of Financial Analysis

[email protected]

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