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The lifestyle changes resulting from the Covid-19 pandemic, and the advent of 5G technology, have raised hopes that the global telecom industry could break out of its seemingly inexorable drift towards commoditization, in which all players gravitate towards equal market shares and provide indistinguishable and interchangeable products and services at identical prices.
While the surge in demand for virtual services and the transformative use cases with regard to 5G could have been opportunities for first movers to distinguish themselves from their competition, our analysis shows that the general trend observed over more than a decade remains unaltered: telecommunication providers still deliver an increasingly similar performance in an ever more competitive marketplace. Overall commoditization levels in both global mobile and fixed telecoms have increased during the years 2019 to 2021 respectively, indicating that operators have by and large still not managed to move towards becoming providers of differentiated, value-added services.
The goal of this study is assessing whether certain players in the telecom market have managed to create and sustain value and distance themselves from the crowd. To determine the level of commoditization within telecom markets throughout 58 countries across all meaningfully populated continents we used two key factors – the average revenue per user spread and the market share spread – and arrived at a Commoditization Index (CI) score for each country.
Commoditization in fixed telecoms
Are market shares converging due to price competition, not differentiation? Are ARPA spreads contracting due to lack of real differentiation? We studied 50+ markets and are inclined to answer: Yes to both. But take a look at the data yourself.
Commoditization in mobile telecoms
Are market shares converging due to price competition, not differentiation? Are ARPU spreads contracting due to lack of real differentiation? We studied 50+ markets and are inclined to answer: Yes to both. But take a look at the data yourself.
Key findings
- Long-term global trends signal increasing commoditization in both mobile and fixed telecoms
On a global level, commoditization in both mobile and fixed telecoms increased within all the assessed time spans – and particularly when gauged in the longer term. - Shifts in consumption patterns triggered by lockdowns offer some respite for fixed markets
On a global level at least, increased demand for online services resulting from the Covid-19 pandemic and potential opportunities favored by 5G technology have not led to any discernible change in the trend towards commoditization. - 5G contributes to hiatus in North American mobile commoditization
The United States has witnessed both a comparatively extensive 5G rollout, and a merger between its third and fourth largest mobile operators, resulting in a new player that now stands to compete on more of an equal footing with the two other national providers. - Western European and Latin American fixed markets defy commoditization trend
The reason for this decrease in Western Europe can be put down to a manifestation of price wars in saturated markets, with companies chasing the same customers and ending up with similar net market shares. In Latin America, the recent trend towards differentiation is primary a result of growing spreads in market share. - Fierce competition characterizes fixed markets in Africa, Central Asia and Asia Pacific
Competition has become more intense as operators expand their broadband coverage and fight for consumers in increasingly penetrated markets. - Increased demand due to pandemic leads to easing of pressure on average revenue per user/ account in more services-oriented economies
This rise in average regional revenues per user/ account in Asia Pacific, Western Europe and Central, Eastern and Southeastern Europe is likely to be the result of increasing demand, as work-from-home due to the Covid pandemic boosted the need for connectivity.
The impact of 5G and online work and shopping on future commoditization trends
The study shows that commoditization levels in both global mobile and fixed telecoms have increased. However, we found there is the potential for differentiation. Those operators who are able to break out of the ‘vanilla broadband’ category altogether and shift part of their value creation to enabling different need states of digital life more broadly across work, home, play, education, mobility and beyond, will be able to create new bundles and greater customer stickiness, and hence reverse the commoditization trend. There is much to play for in the upcoming years for fix and mobile telecoms to stay future-driven and distinguish their products and services in a highly commoditized and competitive market.
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