Telecoms Outlook 2021
Covid-19 has had limited impact on most telecom companies' operational performances and balance sheet strength thus far, but still, we expect 2021 to be another year of low-single-digit growth for the sector. In this Outlook, we identify key themes to watch in 2021 and beyond
Executive summary
Telecom companies have been incredibly strategically important to keep economies and societies going during the pandemic and Covid-19 lockdowns.
Working from home, homeschooling and streaming entertainment services have resulted in a substantial rise in data usage on fixed networks in 2020.
Covid-19 has had limited impact on most telecom companies' operational performances and balance sheet strength thus far. Areas affected include lower roaming fees due to travel restrictions and a decline in handset sales due to store closures.
We expect 2021 will be another year of slow growth. Service revenues are expected to show some recovery during the year as travel recovers. Our base case scenario for the sector is a flat full-year revenue performance. Ongoing cost-saving programs further support the EBITDA result, and we expect low-single-digit growth for the sector.
In this report, we identify key themes to watch in 2021 and beyond.
- Accelerated fibre rollout to make fixed networks future proof will continue to be an essential topic as there is still a large difference in coverage between European countries. We believe companies will adopt the best practices learned during the pandemic, including working more structurally from home, supporting demand for reliable high-speed internet, including fibre-to-the-home and DOCSIS 3.1 from cable companies.
- Telecom companies will continue to explore the possibilities of mobile tower and network monetisation to unlock value. The IPO of Vodafone's Vantage Towers is planned for early 2021.
- We expect M&A to continue to be a theme this year following the General Court of the European Union's decision to annul the E.C.'s decision to block Telefónica's acquisition O2 U.K. by Hutchison and we could see renewed attempts for in-market consolidation in highly competitive markets.
- After the commercial launch of 5G for consumers, the focus will shift to 5G for industrial purposes (IoT). The resulting expected strong data growth requires telecom operators to expand coverage, and further densify their mobile networks. In this transition to a connected Gigabit society, cybersecurity will become increasingly important.
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