Telco Opex Analyzer, 2016-23 Telcos grapple with stubbornly high network opex; look to AI and automation for future gains

"This report reviews the growth and development of the telecommunications network operator (TNO, or telco) market. The report tracks a wide range of financial stats for 140 telcos across the globe, from 1Q11 through 3Q24. For the annualized 3Q24 period, telcos represented $1.77 trillion (T) in revenues (0.1% growth YoY), $262.4 billion (B) in labor costs (0.8% YoY), and $294.3B in capex (-7.8% YoY). They employed approximately 4.45 million people as of September 2024, down 1.5% from the prior year.

Below are a few highlights from the report:

Revenues: Telco topline grew slightly by 0.8% on a YoY basis to post $441.4 B in the latest single quarter ending 3Q24. Revenues for the annualized 3Q24 period were $1,770.6B, up 0.1% YoY over the same period in the previous year. At the operator level, five of the top 20 telcos by topline growth in 3Q24 on an annualized basis include Airtel (4.6%), America Movil (4.3%), STC (Saudi Telecom) (4.2%), Deutsche Telekom (3.3%), and BT (2.5%). By the same criteria, the worst telco growth came from Vodafone (-6.8%), KDDI (-5.7%), NTT (-5.0%), SoftBank (-3.6%), and BCE (-1.6%) during the same period. Note that exchange rate volatility was NOT a major factor in 3Q24, as most major currencies were relatively stable versus 3Q23 levels.

Capex: Capex spending declined by 6.6% on a YoY basis to post $70.7B in the latest single quarter ending September 2024. Capex for the annualized 3Q24 period was $294.3B, down 7.8% YoY over the same period in the previous year. At the operator level, five of the top 20 telcos by capex growth in 3Q24 on an annualized basis include BSNL (300.6%), Telstra (52.3%), BT (4.8%), NTT (3.0%), and China Mobile (1.9%). By the same criteria, the worst capex growth came from Reliance Jio (-27.4%), Verizon (-22.5%), Vodafone (-20.0%), Deutsche Telekom (-18.1%), and KDDI (-16.3%) during the same period.

Opex and labor costs: Total opex for the telecom industry in the annualized 3Q24 period stood at $1,507.9B, a slight increase of 0.9% over the same period in the previous year. Excluding depreciation and amortization (D&A) costs, opex increased by 1.7% on YoY basis to record $1,179.4B in the annualized 3Q24 period. One significant element of telco opex is labor costs, which include salaries, wages, bonuses, benefits, and retirement/severance costs. Labor costs grew by 0.8% YoY in the annualized 3Q24 period, while labor costs as a percentage of opex (ex-D&A) was 22.2% in the same period.

Profitability margins: Both EBITDA and EBIT margins showed a slight decline in annualized 3Q24 compared to 3Q23. The annualized EBIT margin dipped from 15.5% in 3Q23 to 14.8% in 3Q24, while the EBITDA margin for the annualized 3Q24 period stood at 33.4%, down from 34.5% in annualized 3Q23.

Regional trends: The Americas retained its position as the largest revenue-generating region in 3Q24, contributing 37.2% of global telco revenues, closely followed by Asia with a 36.4% share. On a capex basis though, Asia emerged as the top spender, claiming 38.2% of global capex and outpacing the Americas; this is a change from 3Q22 and 3Q23, when Americas ranked #1 on the back of 5G spending by AT&T and Verizon. Europe retained the highest annualized capital intensity, reaching 17.8% in 3Q24, followed by MEA at 17.0%.

The information contained in this report was obtained from both primary and secondary research, supplemented by the expertise of MTN Consulting's analyst team.

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