The goal of this research is to understand how telecoms operators’ investment priorities and investments are likely to change as the COVID-19 crisis recedes. To do this, we collected 144 survey responses from participants in telecoms operators, telecoms vendors, and analysts and consultants and other groups. All responses are treated in strict personal and company confidence. Take the survey here.
Background to the telecoms priorities survey – January 2021
The respondents were fairly evenly split between telcos, vendors, and ‘others’ (mainly analysts and consultants). This sample contained a higher proportion of European and American respondents than industry average, so is not fully globally representative. The split of company types and geography was broadly similar to the May 2020 survey, with the exception of the MENA region, where there were less than half the prior respondents – a total of 7. However those respondents were senior and well known to STL.
Who took the survey?
Source: STL telecoms priorities survey, 144 respondents, 31st January 2021
48% of respondents were C-Level/VP/SVP/Director level. Functionally, most respondents work in senior HQ and operational management areas. Compared to May 2020, there were proportionally slightly more senior respondents, and slightly less in product and strategy roles.
What are their roles?
Source: STL telecoms priorities survey, 144 respondents, 31st January 2021
How respondents perceive priorities, as the COVID threat recedes
There were increases in respondent confidence in almost every category we surveyed from May 2020 to Jan 2021.
Telecoms automation and agility remain top priorities across the industry – and transformation has moved up the agenda.
Appetite for 5G investments increased the most of all areas surveyed in the last 8 months.
The ‘consumerisation’ of enterprise continues, although security and work from home (WFH) services have overtaken conferencing and VPNs in priority.
Healthcare remains the most accelerated vertical / application opportunity of all those impacted in the current crisis.
The priority of consumer services has significantly increased yet confidence in making any additional money in the sector is low.
Leadership and transformation: COVID 19 has empowered an industry-wide belief that change is possible.
Transformation and innovation are high priorities, and appetite for sustainability and recruitment has returned, but there are doubts about some telco leaders’ commitment and ability to grasp and invest in new opportunities.
STL Partners assesses the telecoms industry to be at a crunch point: COVID has injected further pace to the rapid evolution of the world economy. Telcos that have been focused on responding to immediate pandemic-induced challenges, will emerge from the crisis faced with an urgency to respond to this evolution – key choices that telcos might have had 5-10 years to ponder are being crunched into the next 0-3 years.
Our findings suggest that most telcos are only partly ready for this disruptive opportunity.
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Notes on interpreting the research findings
The way research respondents perceive any given question is generally dependent on their current situation and knowledge. To get relevant answers, we asked all respondents if they were interested or involved in specific areas of interest (e.g. ‘consumer services’), and to not answer questions they couldn’t (e.g. for confidentiality reasons) or simply didn’t know or have a clear opinion.
We saw no evidence that respondents were ‘gaming’ the results to be favourable to their interests.
Results need to be seen in the context that telcos themselves vary widely in size, profitability and market outlook. For example, for some, 5G seems like a valid investment, whereas for others the conditions are currently much less promising. COVID-19 has clearly had some impact on these dynamics, and our analysis attempts to reflect this impact on the overall balance of opinions as well as some of the specific situations to bring greater nuance.
In December 2020 / January 2021, the worldwide impact of COVID-19 is increasingly well understood and less of a shock than was the case in May / June 2020. Vaccines are beginning to be rolled out but it is an early stage in the process, and new variants of COVID-19 have evolved in the UK, South Africa and Brazil (and possibly elsewhere). There are geo-political wrangles on vaccine distribution, and varying views on effectiveness and the most appropriate responses. Nonetheless, respondents appear overall more optimistic, although there is still considerable uncertainty.
We’ve interpreted the results as best we can given our knowledge of the respondents and what they told us, and added in our own insights where relevant.
Inevitably, this is a subjective exercise, albeit based on 144 industry respondents’ views.
Nonetheless, we hope that it brings you additional insights to the many that you already possess through your own experiences and access to data.
Finally, things continue to change fast. We will continue to track them.
Table of contents
Executive summary: Opportunities are in overdrive, but can telcos catch them?
High-level findings
Research background
Technology impacts: Automation, cloud and edge come of age
Network impacts: 5G is back
Enterprise sector impacts: Healthcare still leads
Consumer sector impacts: Mojo aplenty, money – not so much
Leadership impacts: good talking, but enough walking?
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The goal of this research is to understand how telecoms operators’ investment priorities and investments are likely to change in response to COVID-19. To do this, we collected more than 200 survey responses from participants in telecoms operators, telecoms vendors, and analysts and consultants and other groups. All responses are treated in strict personal and company confidence. Take the survey here.
This research builds on our initial research on the impact of the pandemic to the telecoms industry, COVID-19: Now, next and after, published in March 2020.
Background to the telco COVID-19 survey
The respondents were fairly evenly split between telcos, vendors, and ‘others’ (mainly analysts and consultants). This sample contained a higher proportion of European and American respondents than industry average, so is not fully globally representative. We have drawn out regional comparisons where possible.
Who took the survey?
Source: STL COVID-19 survey, 202 respondents, May 8th 2020
Meanwhile, 44% of respondents were C-Level/VP/SVP/Director level. Functionally, most respondents work in senior HQ and operational management areas.
What are their roles?
Source: STL COVID-19 survey, 202 respondents, May 8th 2020
How respondents perceive the risks from COVID-19
Respondents were positive on the prospects for most areas overall. We have taken a slightly more pessimistic view in our analysis of the survey results and the categorisation below to balance this bias and factor in future economic risk.
While not all activities we have categorised as “at risk” will necessarily be delayed, we believe that in some telcos there may be more pressure in these areas if the financial impact of COVID-19 is harsher than expected at the time of the survey. We expect that when Q2 results come out, many operators will have a clearer view of how the crisis will affect them financially – and those that are ahead of the curve in adopting technologies such as automation will be in a good position to accelerate their impact, those that are behind the curve may face a more difficult uphill battle.
A relative view of how respondents perceived the outlook for telcos in different business areas and verticals
Source: STL Partners analysis of COVID-19 survey, 202 respondents, May 8th 2020
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Notes on the research findings
The way research respondents perceive any given question is generally dependent on their current situation and knowledge. To get relevant answers, we asked all respondents if they were interested or involved in specific areas of interest (e.g. ‘consumer services’), and to not answer questions they couldn’t (e.g. for confidentiality reasons) or simply didn’t know or have a clear opinion.
We saw no evidence that respondents were ‘gaming’ the results to be favourable to their interests.
Results need to be seen in the context that telcos themselves vary widely in size, profitability and market outlook. For example, for some, 5G seems like a valid investment, whereas for others the conditions are currently much less promising. COVID-19 has clearly had some impact on these dynamics, and our analysis attempts to reflect this impact on the overall balance of opinions as well as some of the specific situations to bring greater nuance.
As of mid May 2020, the total economic impact of COVID-19 was probably less clear to the majority of the respondents than the operational and lifestyle changes it has brought. It is therefore likely that as telco results for Q2 start to be circulated, and before then internally to the telcos, differing pressures will arise than that existed at the time of this survey. The resulting intentions may therefore become more or less extreme than shown in this research, though the relative positions of different activities in the various maps of risk and opportunity may change less than the absolute levels shown here.
We’ve interpreted the results as best we can given our knowledge of the respondents and what they told us, and added in our own insights where relevant.
Inevitably, this is a subjective exercise, albeit based on 200+ industry respondents’ views.
Nonetheless, we hope that it brings you additional insights to the many that you already possess through your own experiences and access to data.
Finally, things continue to change fast. We will continue to track them.
Table of contents
Executive summary: What’s most likely to change?
Research background
Technology impacts: Implementing automation, cloud and edge
Network impacts: Making sense of divergent 5G viewpoints
Enterprise sector impacts: Healthcare and consumerisation
Consumer sector impacts: What will last?
Leadership impacts: Building on new foundations
What next?
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The Coronavirus pandemic is an unprecedented event in our lifetimes. As well as the virus’s impact on health, shock and fear have rippled across the world. Everyday life is changing almost everywhere, with major impacts across the economy. It is having many of the same effects as a new world war, albeit a war against a common invisible enemy.
At the start of every world world war, people in the UK thought it would be over by Christmas. Coronavirus won’t be over by Christmas (December) 2020. Unchecked. Each person with COVID-19 infects about 3 people, on average. This means it is hugely infectious and can (re)infect populations rapidly. Hopefully, better healthcare treatments will be developed fast, and in time a vaccine too – though the World Health Organisation (WHO) believes this will take at least a year, and longer to immunise the population.
On this basis, unless several miracles happen, we think the world is likely to be dealing with some form of social distancing and other preventative and curative measures for a while. Given what we know today, here is our initial take on what telcos are doing now – and what they should do next, including four scenarios to help envisage a range of possibilities amid the current uncertainty.
Telcos and vendors can and should now do some great things
Telecoms is an essential service in today’s world. The initial focus of telcos has inevitably been on the short term crisis response: keeping the network working, adapting to new and changing patterns of customer behaviour, and trying to keep their employees and customers safe. Beyond that, telcos have been offering additional services and help to customers, and we outline some of the measures taken so far in this report (summarised below).
Beyond that, telco leaders must keep thinking and planning ahead. As a sector it is in a relatively strong position. Telecoms stocks are among those least impacted in the crisis, showing that shareholders see telecoms as a relatively safe haven with a more reliable future than many other sectors (e.g. travel, hospitality, etc.).
That’s not to say that all telcos will survive the crisis in the state they are in today. Some may be nationalised or struggle to finance debt or worse, though for the most part we imagine telcos will find state support where needed because of the importance of the service they deliver.
On a more positive note, the near term future will see an enhanced focus on addressing some big problems, such as accelerating the transformation of healthcare and making it and other critical functions such as logistics even more robust and resilient.
STL Partners believes that the crisis will further accelerate the evolution of the Coordination Age, as customers and governments will accept, change and learn new behaviours (such as online ordering, remote delivery, automated services, etc.) fast in the context of an environment in which they simply have to do so. The crisis will also place the importance of critical and sometimes limited resources (e.g. food, healthcare, communications) firmly in the spotlight, along with issues such as potential conflicts between the use of data and privacy.
It’s too early to say whether highly controlled economies like China will do better than less controlled ones. Yet the strengths of a coordinated response to a problem (such as how a national health service can organise and plan collectively) will become clearer, and is likely to shape regulation that prioritises desired outcomes in a more pragmatic way, potentially bringing regulated collaboration back into fashion somewhat compared to pure competition in some sectors.
True leaders think ahead
Despite all the near term focus that a crisis brings, the challenge of addressing future problems should not just be dropped. We recommend that telcos and vendors shouldn’t abandon their longer term ambitions to develop new services and solutions in order to deal with the crisis. By analogy, the countries that are doing best in the COVID-19 response today are those that were best prepared for a viral pandemic, i.e. those that have planned how to scale up testing and hospital capacity, and have previously outlined a pandemic response strategy. Likewise, the telcos that will do best will continue to offer resilient support to their communities, and develop new solutions for customer problems.
Perhaps the best that could happen is that telcos and other service providers could ultimately find this crisis a stimulant to accelerate internal and business model change. For this to happen, the change needs to come from the top, and leaders in telecoms need to set the example of looking to do everything possible to help deal with the crisis, while maintaining a strong forward looking outlook.
STL Partners will continue to research how to do that realistically in the new context. We believe that Coronavirus will change how services evolve. For example, some 5G capital investments are likely to proceed with greater caution in the near term. Our initial thoughts on this is that, rather than bin all development, telcos should use this as an opportunity to better develop their understanding of customer needs, and develop the non-network capabilities and offerings to support consumers and other sectors to prepare the ground better for when 5G does arrive.
Short-term: Some smart offers to copy
Telcos are broadly offering customer support in four ways:
Supporting healthcare, government and other critical care customers: prioritising communications and resources for first line responders and healthcare facilities, offering population movement statistics, participating in national tests, and providing other services (e.g. bulk SMS updates to patients and healthcare communities)
Business customers: support for home working such as increased capacity on collaboration services, support on business continuity
Consumer customers: quite a wide range of offers, varying from suspending data bundle usage caps, to providing free calls for pensioners, free calls to the worst hit countries, waiving roaming charges and late payment relief for COVID-19 impacted customers
Shops and customer premise visits: a range of measures to ensure customer and employee safety, including shutting shops entirely, keeping some open, and introducing social distancing
Mid term: Adjust, but don’t forget the future
For the next few months, humans will interact differently. People and businesses will want to survive, and will be keen to return to ‘normal’ – but they won’t be able to.
Thus new habits, such as home working, and work and social video conferencing, will become more deeply embedded behaviours. New support structures to care remotely for the isolated will evolve, potentially with lasting effects. Telcos will need to support these behaviours with appropriate service and capacity, and with considerate offers as they have started to do as the crisis bites. Telcos should not behave like or risk being seen as profiteers during the crisis. Such action would be wrong – and a PR disaster.
They will need to continue to focus on the needs of critical sectors such as healthcare, government, security and logistics, and maintain a close relationship with government to assist the centralised efforts to combat COVID-19 and support the pandemic relief effort.
Long term: Four possible scenarios
When the future is as uncertain as it is now, scenarios are a useful way to envisage possible alternatives and enrich planning. We’ve therefore outlined four scenarios for the recovery stage:
Scenario 1:Back to (almost) normal. A cautiously optimistic scenario in which all economies recover reasonably swiftly without much impact on the global order. Global trade recovers gradually, and activities like 5G investments are merely delayed at the outset.
Scenario 2:Fragmented recovery. A moderately pessimistic scenario in which some economies are much more significantly damaged than others. Recovery takes longer and global initiatives are less successful because of lower collaboration. 5G take-up is patchy, nation by nation.
Scenario 3:Weak and distanced. The most pessimistic scenario in which nations have become much more insular and distrustful, and economic and social recovery is much slower. Economic realities have significantly delayed 5Ginvestments in most nations.
Scenario 4:Stronger than before. The most optimistic scenario. Collaboration and cooperation are enhanced, and the broadly successful response and recovery to the crisis has refocused strategic thoughts on the importance of resilience in the long-term. 5G is close to the trajectory it would have been on before the crisis and accelerating fast.
Introduction
World War C
The Coronavirus pandemic sweeping the world in 2020 is a truly disruptive ‘black swan’ event. It is impacting people’s lives in almost every nation and will continue to do so for many years ahead.
STL Partners, like all our customers and partners, families and friends, is feeling the impact already. We are lucky enough to be able to continue to work because the nature of our work is relatively unaffected by virtual working. Many in the global economy are not so lucky, and many others have been even more directly impacted by the illness. Our thoughts and best wishes are with you all.
Our job is to try to help others make better decisions to shape the future of their businesses. We believe that COVID-19 will change the global economy in a way that will impact all previous strategies and plans. This analysis is therefore intended to help preparations and planning for the next few months and years. Yet certainty is in short supply, and the situation is changing all the time. We do not claim to have all the answers and will update our analysis when it makes sense.
The scale and speed of this pandemic is unprecedented in the lives of the few alive today under the age of 102. Even so, when the so-called “Spanish Flu” swept the world in 1918, road and air travel were relative novelties, information spread slowly and its distribution was highly limited.
Today, the virus has spread much faster – but so too has news, information and research relating to it. The primary challenges for economies and societies as a whole are:
Supporting the frontline medical battle for the lives of the severely infected.
How the available information can be used to manage the disease to best effect by governments and authorities.
How other technological and economic developments such as globalised food chains and online information and entertainment services can help to sustain the rest of the population until the virus and the fear and disruption it has brought are defeated, or at least brought under control.
Operational and financial support to maintain economies and employment wherever possible.
Coronavirus and the Coordination Age
STL Partners has written at length about the Coordination Age – our view that the world economy now needs on-demand solutions enabled by the emergence of new technologies like AI, virtualisation, 5G, etc. These solutions must deliver outcomes (e.g. in healthcare) in a resource efficient way.
This age impacts all industries, but in the forefront are healthcare and logistics, which are also those most under test by Coronavirus. Succeeding against COVID-19 will require a massive and sustained effort of coordination, in this case mostly orchestrated by governments and health authorities.
Telcos and the telecoms industry will not solve this, but they can be major enablers of success. They can also have a major role in helping societies deal with the crisis and rebuilding and reshaping themselves after it has passed. This report starts to sketch out how this might happen.
Three stages and three questions for telcos
To simplify the analysis of what could happen, we’ve split the near future into three stages, and have structured the report correspondingly:
Now: shock and lockdown. Dealing with the initial global spread of the pandemic.
Next: finding a new, temporary normal. Coping with the longer-term impacts of social isolation, healthcare, and economic damage.
After: rebuilding and reshaping. What will be the lasting changes, what will need to be rebuilt?
In each case, we outline our best views on the ‘certainties’ – or at least more certain outcomes, and explore different scenarios where uncertainty is currently prime.
Throughout, we address three questions about what actions telcos and the industry should take:
What do telcos need to do to survive?
What can telcos do to help their customers?
How can telcos help the immediate response, then rebuild and reshape society?
Now: Shock and lockdown
The problems that need to be solved
A health crisis is a hard reminder of the need to serve the greater good of our societies. We need other people and organisations to survive and thrive, especially in today’s highly globalised and connected world. In this regard, there is an over-riding responsibility for those in positions of power to direct that power in service of the integrity of society and the economy – how we exchange goods and services to maintain our lives.
In such moments, the pursuit of competitive gains which is the normal function of companies and markets becomes secondary to the overall well-being of the society and the economy that supports it. This is a fundamental – albeit temporary – suspension of ‘business as usual’.
Telcos have a long history of providing support in times of crisis, and the COVID-19 pandemic is the broadest and most systemic global crisis of our times. The fundamental functions and sectors that the industry needs to support are:
Healthcare – sustaining and protecting the healthcare system in a time of critical demand and pressure
Logistics – ensuring that supply and delivery chains are enabled to operate and deliver the goods (e.g. food and medical supplies) and services (e.g. water, power, hygiene) required for the healthy function of society
Government – ensuring that governments and responsible authorities are enabled to function and make decisions to best manage, control and mitigate the impact of the virus and the accompanying fear and disruption
General communications – ensuring that the public, businesses and others can stay in touch with each other to provide information, economic, medical and emotional support, and maintain employment.
Immediate actions
Following airline safety advice
The classic airline safety advice is to fit your own oxygen mask before attempting to help others.
We expect that telcos will be putting in place their contingency plans for dealing with the COVID-19 pandemic – though of course, the exact circumstances cannot have been foreseen.
Clearly, maintaining the core functions of telecommunications networks will be the priority – doubling down on enabling and protecting data and voice communications across the network, especially to mission-critical establishments like hospitals, and other healthcare and state facilities.
This may require operators to scale up network capacity at key points, although early data suggests most traffic growth from home-working and home-schooling may come at historical off-peak times. There is likely to be a shift from mobile to fixed broadband in many cases, with mobile use being concentrated in residential areas rather than urban centres and transport corridors. Mobile voice traffic is likely to rise substantially (in Spain, a 50% rise has been reported) as people speak to elder relatives and connect to conference calls and other services. Encouraging customers to shift usage to fixed-line telephony (which usually has extra capacity) could be wise.
Most cloud and enterprise facilities have been engineered to be highly resilient, but there is also likely to be increased demand in the distributed consumption of data in many societies as social isolation measures move populations into home-working environments and away from traditional daytime centres of communications localised on business.
How telcos can support and are supporting their customers
Many telcos are putting in place wider measures to support their customers.
Figure 1: How telcos are supporting their customers
Telco responses to Coronavirus
Source: Operator announcements, STL Partners
For healthcare, government and other critical support customers:
Prioritising connectivity for frontline healthcareresponders (AT&T, Verizon and others)
Offering bulk text upgrades to patients and healthcarecommunities (Vodafone)
Offering insights on population movements and statistics (Vodafone, Deutsche Telekom, Telefonica)
Collaborating in other hospital and healthcaretrials and programmes (China Mobile, China Telecom, TELUS)
Extending free hospital Wi-Fi (Globe)
Free-rating data on healthcaresites and apps
For these sectors and business more broadly, additional:
Conferencing lines, VPN capacity, and capacity / licenses for collaborationtools (BT)
Other home-working security(BT, NTT)
Cut price access to digital marketing services and conferencing for small businesses (Telstra)
For consumer customers, telco measures include:
Additional free data in bundles (Telefónica, Telstra, Dialog)
Removing caps on some limited data bundles (AT&T, Sprint, T-Mobile, TELUS, Telstra, Dialog)
Additional entertainmentcontent in some packages (Telefónica, TELUS, Dialog)
Free or reduced tariff calls to the countries most impacted by COVID-19(Verizon, Sprint, T-Mobile)
Free landline calls for pensioners (Telstra)
Free medical hotline service (Dialog)
Free data packages for families with school children without internet access or no data charges on educational services (Du, Etisalat, Dialog)
Waiving fees / suspension of service for non or late payment for impacted customers, or extending payment terms / credit (AT&T, Verizon, Telstra, Dialog)
Waiving all or some roamingfees for overseas customers (TELUS)
Encouraging the use of digital cash and health apps (Globe)
And in terms of shops and customer premises visits, telcos are taking a range of measures from:
Closing shops, or keeping some open to provide critical equipment (AT&T, Sprint, T-Mobile, DTAG, TELUS)
Possibly stopping or limiting customer premises visits, or continuing but with new isolation/protection procedures in place (AT&T, Globe)
NB This is illustrative and not an exhaustive or comprehensive list. Please see our blog for links to some of the companies’ policies and articles relating to them at the time of research.
STL Partners is conducting a rapid survey of telco responses which can be found here. We will be updating and freely sharing what operators tell us over the next few weeks with details of the measures used so that other telcos can review what they can copy or learn from these measures to support their customers.
Help your employees
Again, many telcos in directly impacted environments have asked employees that can to work from home. We would also hope telcos are putting in place additional health measures to protect those employees that do need to make physical contact with customers and others, such as health advice and screening.
Starting to look ahead
Which sectors will be most affected?
The impact of the COVID-19 pandemic across the economy is very hard to predict at this stage, although there are certain sectors that are clearly already under immediate pressure, such as:
Consumer leisure and mass transport: cruise lines, passenger airlines, hotels and tourism as people shun travel and self-isolate
Consumer service industries such as cafes, bars, restaurants, gyms, hairdressers
Entertainment and mass gatherings such as sporting events, festivals, conferences and events, concerts, museums.
Wider impacts are anticipated in demand for other consumer goods and services, such as cars, clothes and other non-food and everyday items, and this knocks on to the value chains of those industries too.
This pattern is evident looking at the impact on FT.com share indices over the last month in Figure 2. Indeed, of the major sectors, telecommunications was the least devalued on the 16th March when we looked at this data (a day on which there was a 10% drop in global financial indicators).
Figure 2: Financial markets rate telecoms as one of the sectors of the economy least hit by Coronavirus
Coronavirus impact on industries
NB Oil and gas sectors have recently faced additional pressures from an industry price war. Source: STL Partners, FT.com
Moody’s credit rating agency paints a similar picture of their estimated impact of the pandemic on the credit worthiness of industries by sector as shown in Figure 3.
Figure 3: Moody’s credit rating impact of Coronavirus by industry
Source: Moody’s
At this early stage it’s very hard to be sure of what the overall impact of the COVID-19 pandemic will be on each sector. But there’s certainly some consistency between the logic of what is causing the impacts, and the degree to which markets and market rate-setters are reflecting likely changes in future value.
For telcos, the questions are: how can they support all sectors effectively during the crisis, and how can they help them recover and rebuild in due course. We will explore this a little further in subsequent sections.
Table of contents
Executive Summary
It won’t be over by Christmas
Telcos and vendors can and should now do some great things
