Telcos need to build businesses, as well as networks

Telcos are over-invested in 5G in every sense of the phrase.

The latest mobile generation has fallen well short of expectations, as recent numbers from analyst firm MTN Consulting attest. Total operator revenue actually declined in the second and third quarters last year, largely as a result of weak service revenues, MTN found.

In Q3, for instance, service revenues sank 7% – a startling number given the post-covid recovery had already begun – while device sales grew 2%. Services account for nearly 90% of telco revenues, so while the occasional bump in device sales is nice to have, it’s not driving the business.

The other part of this is the world-record capex. Telco capital intensity reached 17.9% in Q3 2022 – an all-time high and up from 16.8% in 3Q21.

So operators have been investing at a record pace but their business isn’t growing. “Telcos, and their investors, expect new revenue streams to result from these buildout costs. So far, 5G has not delivered,” MTN said.

Another analyst, Shiv Putcha from Mandala Insights, says operators’ problems today are a legacy of the 3G era when they invested heavily but prioritized connectivity revenues without grasping the shift in power to the big Internet players.

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