Q2 2022 Telecommunications Network Operators Insights: Persistent Efforts Towards Digital Transformation and Automation Keep Telco Profitability Sound - ResearchAndMarkets.com

DUBLIN--(BUSINESS WIRE)--Oct 26, 2022--

The "Telecommunications Network Operators: 2Q22 Market Review" report has been added to ResearchAndMarkets.com's offering.

This market review provides a comprehensive assessment of the global telecommunications industry based on financial results through June 2022 (2Q22).

The report tracks revenue, capex and employees for 139 individual telecommunications network operators (TNOs). For a sub-group of 79 large TNOs, the report also assesses labor cost, opex and operating profit trends.

The report also covers annual data for other financial metrics such as debt, cash & short term investments, M&A spend and cash flow from operations for all the 79 companies from the TNO-79 subset. Our coverage timeframe spans 1Q11-2Q22 (46 quarters). The report's format is Excel.

2Q22 RESULTS SUMMARY

Telco topline posts steepest quarterly decline since 3Q15

Telco topline nosedived by 6.2% on a YoY basis in the latest single quarter, the most since 3Q15 when revenues fell significantly by 7.2%. Telco revenues reached $448.6 billion (B) in 2Q22, as it registered its third consecutive falloff since the fourth quarter of last year. The steep decline also impacted annualized revenues and its growth rate - they were $1.851T for the annualized 2Q22 period, down 1.4% YoY over annualized 2Q21.

The drop is not as bad as it seems, however: AT&T's April 2022 spinoff of its WarnerMedia unit was big enough to impact the global market. As reported by the company, AT&T's 2Q22 revenues (post spinoff) fell by 33% YoY. If you instead assume AT&T's 2Q22 revenues were flat (0% growth) YoY, revenues for the global telco market would have fallen only by 3.1% in 2Q22, rather than 6.2%.

Annualized capex and capital intensity hit 10-year peak

Despite stalled revenue growth and macro pressures, telcos continue to be on a spending spree. Telco investments grew for the sixth straight quarter with the industry reaching a new capex peak. For the annualized 2Q22 period, telco capex was $329.5B, while the ratio of capex to revenues (i.e. capital intensity) was 17.8%.

Both figures represent new record highs, at least for the 46 quarter period (11.5 years) that MTN Consulting covers (1Q11-2Q22). While post-COVID bump continues to be a key factor behind the capex spending spike, many telcos continue to upgrade networks to 5G, with a growing number beginning deployment of stand-alone 5G core networks, often relying on collaboration with webscale operators like AWS, Azure and GCP for key functions.

Another factor has been the fiber spending by telcos which has been strong in a number of markets, especially the US but also in Europe, Australia, China, and India. That's to support FTTx deployments but also to connect together all the new radio infrastructure needed to support 5G. MTN Consulting expects full-year 2022 capex to total $331B.

Persistent efforts towards digital transformation and automation keep telco profitability sound

Telcos have been able to deliver steady profitability margins amid the immense burden of investments, stagnating revenues, and macro pressures for the past several years. Historically, telco EBIT (operating) margins have been in the range of 13-18% while EBITDA margins have never fell below 30% since 2011. This trend continued to stretch out into 2022. Annualized operating margins ended 2Q22 at 14.9%, slightly up from 14.6% in the same quarter of 2021, while annualized EBITDA margins stood at 33.9% in 2Q22 (unchanged YoY).

Within the overall telco opex budget, telcos are having success in cutting their sales & marketing and G&A spending, as telcos adjust to working from home and accelerate the migration of sales & support to digital platforms. These efforts accelerated in 2020, as COVID-19 spread and telcos were forced to do business with minimal human intervention, but have continued in 2021-22. MTN Consulting expects telcos to continue reducing their headcount by revamping their processes, investing in digital transformation, and adopting automation. These investments will cause labor's share of opex ex-D&A to rise again soon, and remain above 22% for the next few years.

No respite in industry headcount reduction as labor costs rise

Telco industry headcount was 4.59 million in 2Q22, down from 4.74 million a year ago. MTN Consulting expects headcount reductions to continue via attrition and voluntary retirement schemes, heading towards 4.39 million by 2026. Spending on employees (labor costs) continues to be on a rise though on a per-person basis. Even as telcos cut headcount, they recognize how key their workforce is to success. As such they are investing in training programs, and hiring a new generation of highly-skilled employees able to function in the telco of 2022.

Asia remains the biggest market by both revenues and capex

The Asia region maintained its leadership position in 2Q22 after surpassing the Americas region in the previous quarter to become the single largest region by revenues. In terms of growth, all regions were a mixed bag - MEA was the only region to register revenue growth among the four major regions in 2Q22, while all but Europe posted growth in capex in the latest quarter.

Companies Mentioned

• A1 Telekom Austria
• Advanced Info Service (AIS)
• Airtel
• Altice Europe
• Altice USA
• America Movil
• AT&T
• Axiata
• Axtel
• Batelco
• BCE
• Bezeq Israel
• Bouygues Telecom
• BSNL
• BT
• Cable ONE, Inc.
• Cablevision
• Cell C
• Cellcom Israel
• CenturyLink
• Cequel Communications
• Charter Communications
• China Broadcasting Network
• China Mobile
• China Telecom
• China Unicom
• Chunghwa Telecom
• Cincinatti Bell
• CK Hutchison
• And Many More Companies!

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KEYWORD:

INDUSTRY KEYWORD: TECHNOLOGY NETWORKS TELECOMMUNICATIONS

SOURCE: Research and Markets

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