How The Pandemic Will Affect Telcos IT Service Market: A Price Ratio Analysis 😷
In a price ratio analysis of the economic ecosystem, there are areas where the coronavirus pandemic, apart from carrying risks, may paradoxically turn out to be a pro-market factor. One of them is undoubtedly the telecommunications industry.
The telecommunications market in Australia will generally take a defensive position against the announced coronavirus pandemic this year. The diagnosed negative factors, if any, will not have a strong impact on its economic situation. In such circumstances, the telecommunications market defends itself primarily against the cyclicality of revenues generated from subscription fees.
The boom in digital payments will create a price ratio analysis for investors
While the coronavirus pandemic grinds the Australian economy to almost a halt, a boom in mobile digital payments is reviving investor interest in the nation’s telecom carriers.
Forced to stay at home since a lockdown in mid-March, millions of Australians are now using their smartphones to pay for essential items, relying, in turn, much less on cash transactions. Some employers are even using phone apps to salary pay.
A surge of wireless transactions initiates a price ratio analysis
The pandemic is spurring people in countries worldwide to switch to phone apps for payments to avoid touching cash – the predominant mode of virus transmission. The leap toward the technology – use of wireless data for payments – is among initiatives pursued by the carriers. The widespread use of data and social media combined with crushing price war have dented revenues from calls and texts.
An example of which is the regulator in the USA has granted T-Mobile access to additional spectrum on a temporary basis to enable greater capacity to be delivered rapidly.
In the face of the global coronavirus SARS-CoV-2 pandemic, individual industries in the country’s economy look at the situation primarily through the prism of limited investments and financial losses in the short term. And this is an undeniable fact, given that the latest macroeconomic forecasts for Australia assume that GDP may fall to well below 2% annually.
Such industries as trade, catering, hotels and tourism are the ones that will suffer most from the coronavirus pandemic. However, there are areas in the economic ecosystem where the epidemiological situation, apart from the risks, may paradoxically turn out to be a pro-market factor. One of them is undoubtedly the telecommunications industry.
In this article, we will discuss the impact of the pandemic in the telecommunications sector.
It is with the belief that the telecom companies will surge upwards since working from home and teleconferencing will be the new normal in the pandemic.
This will create an overall increase in the demand for telecoms services in the post-COVID-19 era, which may develop into a price ratio analysis for telecoms operators due to the increased IT services demand.
You will learn how telecom is transformed to be the next business realm from the physical to the digital landscape to create a price ratio analysis.
Most countries in the world have implemented physical distancing and stay-at-home/confinement policies. This is to try to limit the rate of hospitalisation during the COVID-19 pandemic and economic activity. Social interactions and entertainment have become increasingly dependent on telecommunications as a result. This has led to an overall surge in the use of ICT services and in the amount of associated traffic. Telecoms operators worldwide are reporting traffic increases of 20–70% during the daytime, driven by increased use of videoconferencing, video and cloud-based ICT services. The telecoms industry is suffering, but much less so than many others.
A surge in telecoms service usage provides operators with increase revenue streams under normal circumstances. But the response from the industry has been quite different in these difficult times. Indeed, some telecoms operators are providing additional free services/data.
The potential market-oriented factors in price ratio analysis may include:
Higher flow of mobile data transmission.
To a large extent, the increased demand for data transmission in phones and additional data packets purchased from individual operators will incur large profits. In such conditions, the revenues of operators in the segment of services will increase.
More SIM cards to keep up demands.
Remote working during the coronavirus pandemic will force companies to increase the supply of SIM cards used in phones. This will increase the mobility and availability of more employees. This will somewhat mitigate the effect of negative growth of all companies in Australia.
Higher volume of virtual calls made in online services as a substitute for physical meetings (social and business).
Due to the increased number of called minutes in the retail market, the volume of terminated calls in the wholesale market will increase. Also, interconnect revenues of telecommunications operators will follow suit. As a result, more operations in mobile networks is expected.
Larger price movements in the market for mobile services.
Mobile operators may take advantage of the crisis to increase the price of mobile subscriptions (mobile services and mobile broadband). This is due to the increased demand for such services in the limited mobility of the population. Included is the compensation for costs generated to handle the increased volume of network traffic (mainly mobile data transmission) on the part of operators.
Greater demand for value-added services in landlines in business, supporting remote corporate and business communication.
However, the scale of the phenomenon is not large and use mainly to the segment of large corporations. Smaller companies in remote communication will mainly use free solutions – like Skype and Microsoft Teams.
The aforementioned increased demand for working from home may force employers to secure the connections between employees’ devices.
The company’s office and servers more effectively protected. As a result, the demand for services of private IP VPN networks may increase. This is not only in their basic or free form but also in the form of more expensive solutions with better parameters. Therefore, this guarantees stable work with the growing needs of enterprises. Of course, this effect can be only short-term.
Increased demand for data transmission services in the DLISP market.
The main catalyst will be the need to increase network capacity to handle data transmitted for streaming platforms, mainly video content services (VOD, OTT, etc.).
Many organisations have accelerated their digital transformations thanks to travel restrictions and the increase in home working. These forced digital transformations, combined with a behavioural shift in favour of online services, may have a lasting effect on trade and collaboration.
Operators are likely to try to preserve cash due to global financial uncertainty. This will affect their investment levels and discretionary spending. Examples of the affected include network upgrades, including those to 5G (unless these upgrades have the direct effect of increasing the network capacity).
The supply chains for electronics and ICT hardware have been disrupted. This is because China was one of the early epicentres of the epidemic. Increase in the price of raw materials causes an increase in subscription and affects the logistics of acquiring. There were delays in deploying new telecoms equipment, even though telecoms vendors are trying to mitigate this impact.
Operators are stepping up to these unique circumstances. Operator executives should remain focused on the immediate day-to-day developments regarding the pandemic. But they should not lose sight;of the opportunities that may be available in the ‘new normal’ that will emerge post-COVID-19.
With the transition to working from home mode,; increased protection and firewall will be more in demand from anti-virus software companies. Also, more stable connections and effective blocking will be the new normal.
Increase in online transactions and remote work will boost the mobile subscription service in the long term. This will transform the way people do business online rather than facing each other.
When your pricing strategy needs refining with the expected surge in demand for IT services, give us a call and we’ll help your pricing teams’ to find the best pricing strategy in IT services.
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