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Telco Opex Analyzer, 2016-22

This report examines opex trends in the telecommunications network operator (TNO, or telco) market. This new edition has expanded the sample telco group coverage from 30 to 33 companies, and added a year of data coverage (2022). This new edition is now based on sample of telcos which more closely mirrors the globe. The regional splits for the sample telco group of 33 companies is spread across major regions with Asia representing 43.8% (of 2022 revenue total by HQ region), Americas 26.3%, Europe 20.3%, and MEA at 9.6%.

Telco revenues dropped by 5.9% on a YoY basis in 2022, to post $1,779.9 billion (B) – a record low in more than a decade. While the key factor behind the steep slump is AT&T’s April 2022 spinoff of its WarnerMedia unit, telcos have historically faced flat revenues with per year top-line growth in the range of 1-3% for several years, after adjusting for exchange rate fluctuations and COVID-19. To add to the woes, telcos have so far been unable to convert growth opportunities from 5G into major new revenue streams. As a result, telcos face the immense burden of keeping the profitability ticking amid stagnating revenues, high capex requirements, macro pressures, and fierce competition from new-age operators. While telcos have been able to deliver steady profitability margins amid flat to slight revenue growth environments for the past several years, they mostly resorted to traditional means of cutting costs in the past mitigation cycles, efforts which have been narrow and tactical in nature; for ex., asset sell-offs, real-estate rationalization, repair and maintenance outsourcing, shared services models. To drive sweeping cost efficiencies, telcos will have to implement dramatic, strategic measures to optimize their cost structure in order to increase and sustain profitability. Hence, understanding and effectively managing opex is crucial for telcos seeking success. Telco earnings reports make this obvious, as they highlight things like opex transformation programs, careful opex management, cost optimization initiatives, network efficiencies, and process automation.

Managing opex efficiently requires dissecting it further into standardized cost categories

Opex as a cost category is several times the size of capex and hence, provides ample opportunities for telco CxOs to reduce overall costs. The problem is that opex is a bit of a mystery due to complexities surrounding it - it's hard to understand across companies, countries, and over time. Reporting categories, definitions, and accounting standards vary widely. This report solves the problem. We have created a taxonomy of opex categories, examined a broad cross-section of telcos, and calculated a detailed opex profile for both the individual companies and the overall telecommunications industry. Key findings include:...

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Best regards,
Matt Walker
Chief Analyst
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