Telecom products are becoming a necessity for most households across the globe, with uptake rates of mainstream digital goods and services largely insulated from economic recessions. This offers considerable protection and benefits to telecom operators and providers, who can be assured of continued subscriber and usage expansion as long as they maintain their competitiveness. Burgeoning online segments such as e-commerce and online adspend can even benefit from a recessionary climate by providing alternative options to cost-conscious consumers and businesses. However, traditional telecom segments can lose their positions to more dynamic disruptive technologies at a time of financial slowdowns.
Global Real Annual GDP Growth and Possession of Digital Durables: 2008-2013
Source: Euromonitor International from national statistics/Eurostat/OECD/UN/International Monetary Fund (IMF), World Economic Outlook (WEO)
Telecom Indicators will Hold up Throughout Economic Downturns
The global economic downturn of 2008-2009 offered the biggest challenge thus far to the global telecom market, yet consumers largely continued to expand their intake of digital offerings throughout the slowdown:
- Every single region worldwide saw an increase in both total annual mobile telephone subscriptions and Internet subscribers in both 2008 and 2009;
- Global home possession of household durables such as broadband enabled PCs, pay-TV platforms, mobile telephones and even video cameras also maintained dynamic growth over 2008-2009;
- On a national level, markets in economic crisis still see expansions in digital consumption. Greece, which suffered real annual GDP decline every year since 2008, has seen an increase in home ownership of cable TV, satellite TV and broadband connections throughout 2008-2013;
- However, under fiscal pressure global consumer expenditure on communications did see a marginal dip of 0.1% in real annual terms in 2009, the only year to do so over the 2007-2013 period.
The rising uptake of services/devices and a minor blip in telecom consumption during the economic slowdown suggests that the world’s consumers are unlikely to discard their Internet connections or mobile subscriptions altogether, but can downgrade price plans or opt for budget options in response to lower purchasing power.
Necessity and Competitiveness Ensure ICT is Recession-Proof
Information and communications technologies (ICTs) have several distinct advantages over other business and consumer segments during times of economic recession:
- ICTs are key to both consumer lifestyles and business operations, with communications necessities such as the Internet and mobile telephony recognised as essential to sustaining a livelihood. The cost of ICT justifies itself, even during an income squeeze;
- Home entertainment is usually prioritised by homes during a recession as it is more affordable than recreational days out or vacations. As a result, homes consume more pay-TV content, console and mobile gaming, digital media, social media and other digital services;
- ICTs are also extremely price-competitive, with a huge array of content available that is either free or extremely low cost. For example, financial crises have stimulated the usage of cheap VoIP services such as Skype, free IP mobile messaging platforms and mobile gaming, which saw its biggest real annual hikes in retail value in 2008 and 2009 over the 2007-2013 period.
E-Commerce and Online Advertising Thrive when Incomes are Squeezed
The capability of the Internet to offer lower-cost alternative options to mainstream services is a strong component of ICT’s antirecessionary strength. Consumers flock to online bargains in greater numbers under economic pressure, as evidenced by global Internet retailing value actually picking up annual real growth pace from 2008 to 2012. Similarly, businesses looked to the online domain to gain brand visibility at a cheaper rate, driving global online adspend value in the process, which saw double-digit annual real growth throughout 2008-2010, levelling off thereafter.
However, technological and trend-based progress can also impact uncompetitive telecom segments during recessions. For example, the onset of wireless voice services have encouraged greater numbers of homes to discard their land-line connections, deemed surplus to requirements. A similar trend is occurring for mobile SMS use in debt-laden Western European markets, with cheaper IP messaging systems growing in influence. Nonetheless, as long as a telecom product remains relevant and price-sensitive within a consumer or business market, it remains more protected from economic turbulence than most other goods and services.