5G take-off fails to revive growth in a mature industry

While generally resilient in periods of economic downturns, the sector is not immune altogether. In particular, because of its capital-intensive nature, it is often relying on substantial debt financing to invest in network infrastructure. As interest rates rise, the cost of servicing this debt escalates, which can significantly impact profitability. Additionally, as consumers grapple with the broader economic implications of rising interest rates, discretionary spending may decline, which can adversely affect the demand for telecom services or lead to greater price-based competition.

Higher financing costs and more cash-conscious consumers are likely to translate into cuts in capital expenditure for network expansion. The 5G roll-out is likely to slow down as the technology has been a major disappointment, both for consumers — because of a lack of innovative services — and telecommunications companies, which have not been able to raise subscription prices as much as they expected. As of 2023, about 1bn mobile-phone users had a 5G plan in the world, the vast majority in China (650mn) and to a lesser extent North America (140mn) and Europe (67mn).