The research, from the Zenith’s Business Intelligence – Telecommunications report, looks at adspend in the 12 key markets. It found that telecoms will rise from £13.9bn in 2020 to £14.6bn in 2021, and then return to its pre-pandemic level of £15.2bn in 2022.
Smartphone sales will start to spring back this year once consumers feel more confident in their future. Consumers are becoming more willing to finance and purchase handsets independently from their network providers, giving manufacturers and retailers a greater incentive to advertise handsets themselves. Meanwhile, the networks will seek to recoup their investment in 5G licences and infrastructure through new services and more expensive data packages. All these trends will help fuel healthy growth in telecoms advertising over the next three years. Zenith predicts telecoms adspend will grow 4.7% in 2021, 4.4% in 2022 and 4.3% in 2023.
Richard Clay, Zenith UK’s Head of Specialist Capabilities, said: “A sharp reduction in smartphone sales in 2020 hit telecoms category spend. As consumer confidence grows and people spend more time out of their homes, the category will benefit from pent-up demand for new handsets and more data. The latest iPhone is Apple’s first 5G enabled handset, this will accelerate 5G’s move to the mainstream and intensify competition and media investment from networks wanting to grow share. A further area of competition in the UK over the next few years will be roaming, as travel increases and networks begin to adapt their offers after free European roaming ended with Brexit.”
Digital platforms help telecoms brands demonstrate relevance to exacting consumers
Voice and data services are commoditised and functionally indistinguishable to consumers, who expect them to work flawlessly in the background and only pay attention to them when they go wrong. High-impact advertising in mass-audience media like television and radio allows telecoms companies to differentiate themselves from others through branding, and makes them more relevant to consumers by promoting their association with things consumers are passionate about, such as entertainment, sport and music. Telecoms brands therefore spend substantially more on television and radio advertising than the average brand – in 2020 they spent 42% of their budgets on television and radio, while the average brand spent 30%.
But as audiences migrate online, telecoms companies are refocusing on communicating their brand narratives to mass digital audiences. Telecoms brands spend less on digital media than average (49% of their budgets went to digital channels in 2020, compared to 56% for the average advertiser), but digital advertising is also the only channel in which telecoms adspend is increasing. Zenith forecasts that telecoms brands will increase their digital adspend at an average rate of 5% a year between 2019 and 2023. By 2023, digital advertising will account for 54% of all telecoms advertising.
“COVID-19 has demonstrated how dependent we are on good, fast and reliable internet connections. Telecoms companies have been the unsung heroes of the pandemic, shifting our lives online and keeping us connected to entertainment, work and commerce,” said Ben Lukawski, Global Chief Strategy Officer, Zenith. “Their challenge is to go from being unsung to being acknowledged and appreciated for their efforts. The spread of 5G and the reality of our new-found virtual lives give telecom brands the opportunity to move into the limelight.”
Telecoms brands are cutting back their spending on traditional television and radio as their reach declines, but less rapidly than brands in most other categories. Zenith forecasts that between 2019 and 2023, telecoms brands will reduce their television adspend by an average of 2.0% a year, compared to a 3.5% annual reduction across all categories. They will also reduce their radio adspend by 2.8% a year, compared to 4.1% a year for the market as a whole.
India and Russia to lead telecoms adspend growth
Zenith forecasts that India will be the fastest-growing market for telecoms advertising between 2020 and 2023 by some distance, with 11% annual growth. According to eMarketer, only 31% of the population currently has a smartphone, but thanks to the launch of low-price handsets such as the JioPhone, this proportion is rising rapidly. Russia is another market with relatively low (57%) but fast-growing smartphone penetration, and here telecoms adspend is forecast to rise rapidly too, by 8% a year.
Most of the other markets in this report are forecast to grow by between 3% and 6% a year to 2023. The exception will be France, not because of any inherent weakness in demand, but unlike those in most markets, French telecoms brands actually increased spending in 2020 – by 6% – in response to the extra demand for data. The basis of comparison with 2023 is therefore considerably tougher.
“The rollout of 5G services will allow mobile operators to supply bundled voice, data and entertainment services to the home and compete directly with landline broadband,” said Jonathan Barnard, Head of Forecast, Zenith. “This will spur greater competition to put together the most attractive services at the best prices and help stimulate a sustained recovery in telecoms adspend to at least 2023.”
*The 12 markets included in this report are Australia, Canada, China, France, Germany, India, Italy, Russia, Spain, Switzerland, the UK and the US, which between them account for 73% of total global adspend. Telecoms is defined as services and equipment facilitating the transmission of voice calls and data by land lines and mobile networks.