WCA March 2018

Telecom news

Ø With Canadian consumer debt levels continuing to set record highs, household spending growth is forecast to slow going forward. Telecoms will have to keep price increases manageable for their increasingly tapped-out consumers in order to maintain their existing customer base as much as possible. Ø While acknowledging that the risks are tilted toward the downside, the CBOC report noted that its recent financial performance suggests the Canadian telecom industry “will remain healthier than most.” Industry pre-tax profits are projected to increase by 3.7 per cent to reach $9.1 billion for 2017. While industry profitability will remain elevated, the CBOC expects weak pricing and increased competition to drive the industry’s pre-tax margins down from 13.3 per cent in 2017 to closer to 12 per cent over the next five years. From a venerable and trusted source: a strong suggestion that telecoms pay close attention to their investment priorities In December Martyn Warwick of TelecomTV called attention to “something eminently sensible and considered” from the London-based Economist Intelligence Unit (EIU), a forecasting and advisory services business which is part of the Economist Group. In its latest special report, Telecoms in 2018, the EIU asserted that in the New Year the finances of the global telecoms sector will come under sustained strain as the industry faces pressures from various quarters. The push for 4G and 5G connectivity is seen as continuing unabated even as demand for mobile bandwidth reaches new levels. This will require telecoms and service providers to undertake massive (and massively expensive) programmes of capital expenditure at a time when intense competition and its attendant price wars will further diminish operators’ revenue streams. (“Perfect Storm to Hit Telcos Next Year,” 10 th December) In the EIU view, to stay in the game and eventually reap the rewards of the worldwide wave of network transformation and the commercial deployment of 5G, operators will

The Worldwide Semiannual Internet of Things Spending Guide from IDC examines IoT opportunity from “a country, industry, use case, and technology perspective.” In a December update to its mid-year report, the New York-based market intelligence firm forecast worldwide spending on IoT to reach $772.5 billion in 2018, an increase of 14.6 per cent over the $674 billion that would be spent in 2017. The industries expected to spend the most on IoT solutions in 2018 are manufacturing ($189 billion), transportation ($85 billion), and utilities ($73 billion). Some $239 billion will go toward hardware, the largest technology category, mainly for modules and sensors with some additional spending on infrastructure and security. Services will make up the second-largest technology category this year, followed by software and connectivity. Software spending will be led by applications, followed by analytics, IoT platforms, and security. With a five-year compound annual growth rate (CAGR) of 16.1 per cent, software will also be the fastest-growing technology segment. “By 2021, more than 55 per cent of spending on IoT projects will be for software and services,” Carrie MacGillivray, IDC’s vice president of IoT and mobility, told Guy Daniels of London-based TelecomTV (8 th December). “Software creates the foundation upon which IoT applications and use cases can be realised.” IDC sees the global outlay on IoT maintaining a CAGR of 14.4 per cent from 2017 to 2021, topping $1 trillion in 2020 and reaching $1.1 trillion in 2021. For 2018 the spending outlook by region is: Asia/Pacific (excluding Japan) – $312 billion; North America – $203 billion; and Europe, the Middle East, and Africa – $171 billion. Among individual countries China will account for the most IoT spending this year ($209 billion), with heavy investment from manufacturing, utilities and the government. IoT spending in the USA is expected to total $194 billion, led by manufacturing, transportation and the consumer segment. The third- and fourth-largest spenders on IoT in 2018 will be Japan ($68 billion) and Korea ($29 billion), the outlays driven largely by their manufacturing industries. With Asia/Pacific in the lead at $312 billion, global Internet of Things spending is forecast to reach $772 billion this year

The Canadian telecommunications sector – seen as ‘remaining healthier than most’ – nonetheless faces bracing challenges According to Canadian Industrial Outlook: Telecommunications – Autumn 2017, published on 30 th November by the Conference Board of Canada (CBOC), the country’s telecommunications industry will face slower growth as it grapples with an increasingly saturated market that serves consumers with less to spend on their telecom bundles. The independent non-profit research organisation also sees the industry as having to deal with uncertainty created by the North American Free Trade Agreement (NAFTA) renegotiations.

“Even though the sector has very little direct impact on the trade balance, Canadian telecommunications finds itself as one of the industries singled out for targeted action by the US administration because of foreign-ownership restrictions,” said Todd Crawford, principal economist with the Conference Board. (“NAFTA Renegotiations and Weaker Consumer Spending to Weigh on Canada’s Telecommunications Industry,” 14 th December) Some details from the CBOC report: Ø Industry prices are expected to increase by only 1.3 per cent a year between 2017 and 2022, compared with 2.1 per cent between 2012 and 2016 Ø Industry pre-tax profits are projected to increase by 3.7 per cent to reach $9.1 billion in 2017 and recede slightly in 2018

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Wire & Cable ASIA – March/April 2018