Telcos Pay 5g Price: Higher Debt, Lower Margins In 2022

Telcos Pay 5g Price: Higher Debt, Lower Margins In 2022

This brief report presents data aimed at shedding light on the following question: can telcos afford to pay for their future investment needs? The report considers debt, cash, and margin metrics, for the industry overall and for specific key players. It also speculates how 2022 trends may impact 2023 and beyond, in a rising interest rate climate. A number of large telcos have high debt, low margins, and/or weak top line growth, and may have to curtail spending in 2023-4 in order to cope with this reality.

Key findings include:

Total telco debt in 4Q22 was $1.14 trillion, 17% due in next year
Software capex as a % of revenues was 1.9% in 2022, up a bit from 1.8% in 2021.
Spending on acquisitions amounted to 0.5% of revenues in 2022, the lowest figure since 2012.
At the industry level, the ratio of net debt to EBITDA in 2022 was 1.9, a bit up from 2021 but down from 2020.
A number of large telcos face short-term debt levels over 30% of total debt
Average margins for the industry in 2022 disappointed: free cash flow margin for the telco industry in 2022 was 11.4%, down from 12.6% in 2021; EBITDA margin was 33.7% (2021: 34.0%), and EBIT margin was 14.4% (2021: 14.9%).

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