Telecommunications industry: what’s new?

By Benjamin Sauge

According to Deloitte, “the telecom sector continues to be at the epicenter for growth, innovation and disruption for virtually any industry. Mobile devices and related broadband connectivity continue to be more and more embedded in the fabric of society today and they are key in driving the momentum around some key trends such as video streaming, Internet of Things (IoT) and mobile payments.” This definition that the accounting organization made in 2017 highlights the value of the telecommunication sector in today’s society.

THE SMARTPHONE INDUSTRY

As the Mobile World Congress — a major event for telecoms — takes place in Barcelona, Strategic Analytics released a report about the smartphone industry, showing that, in 2018, it has known its first drop, with decrease of 5% with regards to smartphone deliveries. According to Strategic Analytics director Linda Sui, “this is a turning point” for the industry. Even China — that represents one third of the worldwide sales — has faced a 11% drop in 2018, which is even more impressive that in India, sales are in full expansion.

Even though Apple and Samsung warned their investors about their current results in the last month, Huawei played the game admirably, selling 200 million smartphones in 2018 and becoming the world’s second smartphone producer.

According to GSMA — Association of GSM mobile telephone operators — just over ten years after the first iPhone, market saturation has installed. Since 2017, more than 5 billion people already possess a SIM card, and even if the growth will be driven by the developing countries (India, China, Indonesia, Latin America and Africa), “the pace of growth is slowing down”.

The major issues that faces the industry are: a lengthening of duration use coupled with higher prices and devices not enough innovative. In response, the “repacked smartphones” seem to be a good option: cheaper and eco-friendly. This new market is already representing 22 million devices per annum.

THE EUROPEAN TELECOMS

Deutsche Telekom, Europe’s largest telecoms company (by value), have issued a mixed guidance for the coming financial years, warning its investors of a slower growth, due to competition and continued uncertainty. The EBITDA — earnings before interest, taxation, depreciation and amortization — of the German company rose by 4% in 2018 to €2.2bn. Deutsche Telekom faced a 0.2% rise in the fourth quarter of 2018, slower than its previous quarters, and its 0.9% growth rate for the year.

In France, Orange warned about a slower EBITDA growth for 2019, reflecting a “market environment that remains highly competitive, particularly in France and Spain”. The French telephone operator saw its sales revenues increase for the seventh consecutive quarter, a first since 2009, due to the optical fiber market.

Lastly, Spain’s Telefónica sold both its business in Guatemala and El Salvador to América Móvil, and three small units in Latin America to Millicom for €1.5bn. Net debt, which represent €41.8bn, has been a key problem for the company in the recent years, but it has been cut for seven straight quarters.

5G NETWORKS

For Europe’s biggest telecoms companies, 5G could offer the prospect of regaining growth and high performances, after a decade-long price war during the 4G era. Between 2012 and 2018, their value has almost halved, from $234bn to $133bn, according to Bloomberg, while the US sector has risen by 71%, and 13% for Asia. The launch of 5G could significantly reduce the cost of delivering data and ease the burden on networks. But the current delays in the UK and Germany with regards to the competition of Huawei in Europe reveals the anxiety and the scepticism about the issues of this new network for both companies and governments.

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