Operators tend to have more pricing flexibility with mobile than with fixed-line or enterprise service contracts
Spending on telecom services is expected to rise by 1.9% this year to a global market value of $1.6 trillion, according to IDC’s Semiannual Telecom Services Tracker.
That figure is “a bit more optimistic” than the one published in May, due to the influence of inflation around the world, IDC noted—many operators around the world are raising their service prices, so consumers will have to spend more on those services, and the overall value of the market will go up more than originally anticipated.
IDC bumped up its forecast for telecom spending by just 0.3% in the Americas, but by 0.9% in EMEA because Europe is struggling with higher inflation than the rest of the world, due to rising energy prices related to the Russian invasion of Ukraine. Still, the region with the fastest overall predicted growth is the Asia-Pacific region—partly because of inflation, but also because some markets in that region have a relatively lower saturation of the telecom market, the firm noted.
IDC added that as operators begin to raise service tariffs, they are often starting with their mobile services.
“Most of the operators have initially focused on the mobile section of the market, lifting the average prices by a high-single-digit percentage. This has been done because the mobile section represents a major part of every telco market, so the outcome of such action is visible sooner,” said IDC in a release, adding that the focus on consumer mobile also happens because operators have less pricing flexibility in their fixed-line and enterprise segments, where there are often multi-year contracts in place that have penalties associated with any changes.
IDC therefore expects mobile services spending in 2022 to grow by 0.7%, above the overall market average.
Rising prices can cause a decrease in demand from consumers and businesses who balk at, or simple cannot afford, paying those prices, but IDC said that because telecom services are so important as to be considered a basic utility, “the decrease in demand is not likely to be massive.” Still, the firm warned that inflation plus a possible recession “might ruin the fragile balance between prices and demand.”
“This puts telecom operators in an uncomfortable position,” said Kresimir Alic, research director of Worldwide Telecom Services at IDC. “Maintaining healthy margins will require additional rounds of price increases and their ability to carefully balance between the two forces will determine the future development of telco markets in individual countries, regions, and the whole world.”
