Telcos’ broadband revenue growth to accelerate following pandemic-induced service uptake

• Industry revenue estimated to rise by 5-7%
• Mobile data revenue likely to expand by 15-20%

Telecommunication companies, which became early winners of the pandemic, will continue to ride on that momentum, as Fitch Ratings this week painted a brighter outlook for the sector with an accelerated growth for broadband services through 2021.  

According to Fitch’s estimates, industry revenues will grow between 5 to 7 percent in 2021, driven predominantly by the increased uptake in broadband services and heavier reliance on data, as everything from work to education to shopping to entertainment to dating have shifted online due to COVID-19.

“We expect 2021 industry revenue to rise by 5-7 percent, driven by a surge in data and fixed broadband, following lower growth of 2 percent -3 percent in 2020,” Fitch Ratings said.

 “… mobile data service revenue is likely to expand by 15-20 percent (2020F: 25 percent -30 percent) on higher smartphone penetration and rising data consumption,” the rating agency added.

Data is also displacing voice at a phenomenal speed as people nowadays avoid speaking over the phone, instead have become antisocial, and screen addicted freaks who ditch calls no matter how many time one calls. 

In what is seen as rapidly changing interactions between human beings, people now prefer knocking a million times on a screen pad to send what they want to say to the other side, a thing which can be done in less than a minute over a simple phone call. 

But the telecos have been so sharp as they are fast making up for the lost voice revenues through aggressive promotion of extremely generous data packages. Meanwhile, the faster uptake in broadband has also made possible for telcos to enjoy large economies of scale as they are making revenue from a broadband infrastructure already in place. 

As a result, telcos are forecasted to enjoy stretched operating margins from “larger economies of scale in the data segment and cost savings offset falling profits in the voice and text segments”, Fitch added. 

But limited bandwidth amid rising subscribers and heavier usage have made Sri Lanka’s internet quality extremely poor, a survey by Surfshark, a virtual private network provider showed recently.

For instance, the pandemic sent broadband subscribers up by as much 45 percent in 2020, followed by 12 percent increase in the digital TV households and 9 percent increase in mobile subscribers at Dialog Axiata PLC as social distancing forced people to glue to screens.