Summary Bullets:
• In their first round of quarterly results since the widespread outbreak of COVID-19, network operators provided few specifics on the true impact of the pandemic on 2020 outlooks.
• Most operators remain hopeful that a fuller picture of the impact of the disease will emerge in time for Q220 earnings releases, but that is likely to vary significantly by region and country.
With most of the world’s largest network operators now having chimed in on Q1 2020 earnings, what is clear is that little remains clear in terms of how COVID-19 will impact them this year. Most operators have withdrawn full-year guidance and have indicated that a reliable picture will not emerge until the true trajectory of COVID-19 becomes clear. Since that answer can vary significantly from country to country, region to region, and city to city, most operators lack the tools to provide reliable guidance.
• All operators expect a significant impact on enterprise revenue, they just don’t know how big of an impact.
• Most operators are seeing relatively flat consumer revenue despite massive increases in network usage.
• Many operators have held firm on CapEx expectations but have indicated potential slowdowns, either because of logistical/delivery challenges or as a means to maintain free cash flow in the wake of declining revenue and increased network operational costs.
• Operators in North America and China have affirmed their commitments to aggressively deploying 5G networks. In contrast, European operators have been less vocal on 5G and may need to delay 5G investments because of delivery challenges and in order to preserve cash.
There were a few bright spots. On May 14, Deutsche Telekom largely held firm on its full-year guidance. Operators in the U.S. were able to procure temporary access to additional spectrum – with the active support of the FCC – to augment their capacity for the next several months. And through it all, operators, regulators, and over-the-top providers like Netflix and Amazon have engaged in an unprecedented cooperation to ensure that network quality levels can be maintained.
Still, overall the results left a distinct lack of clarity which is not likely to abate until operators have a clear view on whether current social distancing measures are truly stamping out the pace of outbreak and allowing economies to open up more fully. In short, with their first opportunity to provide significant insights into how COVID-19 was impacting their operations, most operators understandably punted.
We expect (or perhaps “hope” is a better word) that a much clearer picture will emerge with Q2 2020 results this summer, but that will depend on how the pandemic runs its course by then.