New research - The impact of the Coronavirus pandemic on CSP revenues and telecoms software vendors
In Q2 2020 Telecoms Tracker’s quarterly CSP survey was devoted to a large-scale data collection analysing the impact of the Covid-19 pandemic on Communication Service Providers’ business and the knock-on effect on their software investment strategies in the short to medium term. We had 521 responses to our twenty question survey which will be available in full on July 31st as a large analyst report and data file.
Starting at the highest level, Question 1 was:
What impact has the C-19 pandemic had on your overall revenues for this quarter (April-Jun 2020)?
40% of all respondents believe that there will be no effect on their overall revenues in the period April to June 2020. 30% believe that their company’s revenues will be down by 5% and 15% of respondents believe they will be up by 5% on the same period 2019. A weighted view would put the overall impact on the CSPs for the quarter in the -2% region (note: there is a European bias to the sample set). The more significant metric of mid-term industry impact is how this downwards trend will level out and what will be the length of recovery? This is something we model in the report using the survey data, nuanced information from the interviews and financial reporting coming out in June/July.
“The lines of business where we are seeing losses, fall broadly into two categories: one which will track a global economic downturn such as families on lower incomes cancelling their video on demand bundles or in some cases mobile subscriptions, these will take several years to rebound. The other category is one which will bounce back quickly like enterprise unified communications revenues as the office buildings start to refill in July/August. In our business the latter will outweigh the former so we’re expecting a fairly rapid recovery if Covid goes away and doesn’t return.” – Planning team member, European MNO
The tone of the interviews was of course mixed, but overall there was a feeling of optimism towards consumer communications revenues throughout the lockdown phase in addition to many media and retail lines of business being dramatically boosted, offsetting losses across B2B communications sectors. The industry is also enjoying a period of good will from its customers as the lifeline of communications and content delivery have meant so much more during enforced isolation.
“Our NPS score has gone through the roof - by Telco standards - in the first half of this year. Much of that is thanks to our core network resiliency. Even though we’re seeing usage on consumer broadband wireline domains up by 200%, there is still overhead in the network and QoS is unaffected. People are recognising that under these extreme conditions of lockdown losing their lifeline to the outside world would be disastrous, but they are downloading movies, taking Zoom calls, ordering groceries and streaming music with no problem and they are grateful for that at $50 per month” – US Tier 1 employee
The importance of a diversified business model
Niche operators such as suppliers of communications to the aviation industry have become heavily exposed to the sudden impact of the pandemic on their customer’s sector, whereas multi-service, highly diversified CSPs look to be riding the storm as some of their lines of business boom while others falter. The enterprise side of many operators business has suffered in its core services with millions of empty workplaces around the world and with a large number of SME’s facing closure, unable to pay their bills. In the report we have included detailed information from four European CSPs on their projections for B2B revenue impact for the next 12 months and where B2B revenues can be readjusted from home broadband or mobile broadband connected workforce products.
“This pandemic will allow us to unlock some of the capital we have in the coffers, that would not normally have been spent due to shareholder pressures, that will fund a five year investment plan with some real purpose. The network investment plan is 80% the same as it was before, but there are some changes that need to be made which obviously equates to several billion Euros being redirected. " – Operations team member, European fixed and mobile service provider
The ongoing ‘new normal’ effect
The industry has obviously seen a surge in home broadband usage and uptake during the pandemic, but there is a feeling among fixed line broadband service providers that we are seeing a more profound change in increased home working that will last well beyond the relaxing of movement restrictions. Investment plans are consequently pivoting towards expanding capabilities in that domain. As network resiliency has been very good on the whole, we don’t believe these investments will be 100% focused on increasing capacity, but on realising new opportunities in the altered markets going forward. We may also see some complex new tariff models where businesses can pay for their employees home broadband in office hours.
“The pandemic has validated many of our decisions from the last decade to build virtualized core network assets and build as much elasticity into the network as possible. Some of the things that the software has been doing under the hood to keep things running smoothly over the last few months is incredible. The next focus is to take those incredible things and aim them at helping our enterprise clients recover and run a growing consumer business through recession.” IT Manager, Canadian MSO
The impact on telecoms software vendors
Our interviews show that CSPs investment strategies are indeed changed somewhat for the next 12 months, but there is very little cancellation of investment plans, as was first feared. This is creating some new hotspots in the OSS/BSS/Network software markets as CSPs turn to their vendor partners for help in making changes that are not just patching the hole, but strategic moves to address a changed market. ‘Agility’ has been the buzzword of recent years, but with little need to put that agility to the test beyond competitive advantage. This new report looks at all hotspots discussed by our respondents and what the vendors need to do to meet those challenges.
“Reacting to this event and turning around a large-scale transformation project half way through is basically impossible, but we spend pretty much all of April in meeting discussing what we need to do internally and with our technology suppliers to chase this ‘new normal’. We think the effect on society is more significant than people think and we want to be mindful of that and not just carry on with what we were doing regardless. So everything has been open to review” – Operations manager, UK MNO
The complete contents of the survey report can been found here: