IDC Predicts Slower Telecom Growth: Can AI Boost Telco Margins?

In 2023, global spending on Telecom Services and Pay TV Services reached $1,509 billion, marking a 2.1% increase compared to 2022, according to the International Data Corporation (IDC) Worldwide Semiannual Telecom Services Tracker. Looking ahead, IDC forecasts a further 1.4% increase in spending for 2024, projecting a total of $1,530 billion.

The growth trajectory of the global market experienced a slowdown in the latter part of 2023, with the overall growth rate for the year approximately one percentage point lower than IDC’s initial forecast. This deceleration was primarily attributed to slower-than-expected progress in the Americas region, where factors such as sluggish economic growth, relatively high inflation, and market saturation hindered market development. Conversely, in the Europe, Middle East, and Africa (EMEA) region, despite facing similar economic challenges, telecom operators, authorized by regulators to adjust tariffs in line with inflation using a Consumer Price Index (CPI) model, experienced slightly faster market growth than anticipated. However, it’s noteworthy that these tariff adjustments also prompted a shift of customers towards more affordable tariff packages and operators, resulting in actual value growth rates typically less than half of the nominal tariff increases.

The breakdown of global regional telecom services revenue and year-on-year growth indicates a mixed picture:

  • Americas: $571 billion in 2022 to $574 billion in 2023, marking a 0.5% growth.
  • Asia/Pacific: $467 billion in 2022 to $481 billion in 2023, representing a 3.0% growth.
  • EMEA: $439 billion in 2022 to $454 billion in 2023, showing a 3.3% growth.
  • Grand Total: $1,478 billion in 2022 to $1,509 billion in 2023, with a 2.1% growth.

Looking forward, the global connectivity services market maintains a positive outlook over the next five years, albeit slightly less optimistic than previous forecasts. Delays in central bank decisions to decrease reference interest rates in key regions such as the U.S. and Europe, coupled with persistent inflation, are expected to sustain an unfavorable market environment for several years. Additionally, geopolitical tensions, particularly conflicts in Eastern Europe and the Middle East, contribute to uncertainty and may dampen growth rates. In the Asia/Pacific region, slower growth is attributed to the moderation of the Chinese economy, although positive trends are anticipated from healthy growth in India and other developing markets.

Analyzing service types, established trends persist despite changes in forecasts. The mobile segment remains dominant, driven by the surge in mobile data usage and Machine-to-Machine (M2M) applications, offsetting declines in mobile voice and messaging services. Similarly, the fixed data services segment continues to grow due to rising demand for higher-bandwidth services. However, spending on fixed voice services is projected to decline as traditional voice revenues wane, albeit partially compensated by the rise in IP voice. Despite a slight decline in the Pay TV market, Video on Demand (VoD) and Over-The-Top (OTT) services remain integral to telecom providers’ multiplay services.

Kresimir Alic, research director of Worldwide Telecom Services at IDC, emphasizes the potential of Artificial Intelligence (AI) and advanced analytics as powerful tools for telecom operators to modernize their business operations and enhance efficiencies. Identified use cases include customer service chatbots, virtual assistants, network modernization, predictive maintenance, personalized marketing, fraud detection, churn predictions, and revenue assurance. These innovations are expected to streamline operations, improve customer experiences, and maintain competitiveness in the evolving industry landscape.

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