Trade wars, Brexit and 5G = bad news for telcos in 2019: EIU

2019 5G brexit trade war EIU
Image credit: Elnur /

A global trade war, Brexit and cybersecurity are among the main risks facing companies globally in 2019 – and telecoms is one of six major industries whose growth could be derailed next year as a result. What’s more, the push towards 5G could make matters worse for telecoms.

The Economist Intelligence Unit (The EIU) issued a new report on Tuesday that named five major risks that could curtail growth for global industry overall next year: a US-China trade war, a global economic slowdown, Brexit, sanctions on Iran, and cybersecurity risks.

The EIU report looks at the impact of this scenario on six business sectors worldwide: automotive; consumer goods and retail; energy; financial services; healthcare and pharmaceuticals; and telecoms.

“We do expect all six of these industries to carry on growing in 2019, but companies will need to manoeuvre adroitly to avoid the increasing barriers to business,” clarified Ana Nicholls, director of industry operations at The EIU.

If the US-China trade tensions escalates into a full-blown global trade war, that would disrupt supply chains and undermine business and consumer confidence, dampening investment and private consumption, the report says. Regarding Brexit, the UK’s exit from the EU in March 2019 will impact sectors including financial services, automotive and healthcare, regardless of any deal that is struck. As for Iran, the US’s decision to backtrack from the international Joint Comprehensive Plan of Action could push up global oil prices in 2019.

For telecoms specifically, the EIU warns that escalating US-China trade tensions and an increasingly uncertain Brexit outlook could stifle telecoms investment and jeopardize sector growth in the coming year.

Meanwhile, the prospect of repeated cyber attacks of increasing severity looms large, and with the field of connected devices expanding, governments will have to respond to this threat with both regulation and investment, said Matt Kendall, telecoms analyst at the EIU.

“The telecoms sector will have to deal with an array of headwinds in 2019, including a challenging geopolitical environment tarred by trade tensions, significant pressure on investment in several key areas and the prospect of cyber-attacks that could become more extensive and damaging in scope,” he said.

One specific issue for telecoms is the current push by vendors, operators and even government regulators to speed up 5G adoption. Kendall says that a combination of technological obstacles and an underdeveloped regulatory framework will prompt operators to sidestep 5G and focus investment on 4G to cut churn.

“Mobile phone penetration will grow only slightly over the coming year, leaving operators to grapple with the prospect of balancing long-term 5G investment and testing with the more immediate prospect of 4G network and coverage enhancements, in a bid to reduce churn,” Kendall said. “This balancing act will be made all the more challenging, with a host of markets becoming sites of increased competition and regulatory scrutiny.”

Consequently, he added, “as in previous years, manufacturers and operators will place an increasing focus on growth opportunities in the smart devices and technology space, amid signs that the global smartphone market is stagnating.”

Kendall’s prognosis follows closely on the heels of a report by Rethink Research that found mobile operators are being cautious with their capex budgets, and will initially invest in 5G mainly to boost data speeds in macro cells to maintain growth in traditional mobile broadband services, rather than take a chance on new revenue streams enabled by 5G’s virtualization and densification capabilities.

The full report is available for download here.

Be the first to comment

What do you think?

This site uses Akismet to reduce spam. Learn how your comment data is processed.