The telecommunication network installation market - England

1.2 the telecommunications services and network infrastructure sectors in the world

In recent years, especially with the spread of the pandemic, the telecom industry has become essential for global growth. Every individual, economic sector and governments have started to make more use of communication means to send data, signals and messages.

Telecommunications services

In the past, the costs for installing and maintaining networks were covered by governments. However, with market liberalization policies around the world, more and more companies have borne the costs, including Vodafone. In ****, the company's capital expenditures reached €*,** billion in **** and in Europe alone. In fact, it must be considered that this sector requires a large amount of investments and workforce of qualified technicians who know how to install and adjust telecommunications infrastructure equipment. For example, China, due to its large size, is the country with the highest number of telecommunication workers at ***,*** employees.

Over the years, the global expenditure for telecommunications services has been very high, due to the numerous costs to be faced. The following graph shows the forecasts of spending from **** to ****, which will remain around *.* billion dollars.

Global spending on telecommunications services World, ****-****, in billion of U.S. dollars Source: ****

The telecommunication services market includes two main service: wireline and wireless. The wireline services, ...

1.3 The UK market, the fifth-largest country in terms of network infrastructure revenues worldwide

In the United Kingdom, there are roughly ** million inhabitants that are connected by the telecommunications industry. Over the past years, the telecommunication industry in UK has recorded a decrease in revenue up to ****, instead, in **** it recorded a growth of **.*% reaching USD **.** billion. The declines in revenue are partly due to the decline in prepaid and postpaid mobile consumers. This has led to a reduction in the average earnings per user (***) of the UK companies. However, the telecommunication market is projected to reach USD **.** billion in **** and to grow at an annual growth rate CAGR of *.**% over the forecast period ****-****.

Telecommunications industry revenue United Kingdom, ****-****, in billion GBP Source: ****

In the UK, the most valuable telecommunications company is Vodafone. In ****, its market value was ** billion dollars.

the most important companies according to their market value UK, ****, in million of dollars Source: ****

Vodafone is one of the world's leading telecommunications companies. However, figures up to March ****, show a decline in revenue.  This decline is due to a reduction in average revenue per ARPU user.

Vodafone Group Revenue Uk, ****-****, in million euros Source: ****

Telecom network infrastructures

The United Kingdom in **** was the fifth-largest country in terms of network infrastructure revenues ...

1.4 The trade balance in deficit

The following graph shows the development of imports and exports of:

Telephone sets, including telephones for cellular networks or for other wireless networks; other apparatus for the transmission or reception of voice, images or other data (***)

The graph below shows that from **** to ****, the value of imports was always higher than the dollar value of exports, with some lows and some highs. In particular, in ****, imports increased considerably due to higher demand, reaching almost USD ** billion. However, in ****, the value of exports increased to almost USD * billion, **% higher than in ****, due to higher investments and technological developments.

The coverage ratio, shown with the continuous light blue line, is important because it measures the percentage of exports covered by imports. It is calculated as the percentage ratio between the country's exports and imports. This value can be greater or less than ***, meaning that the trade balance is in surplus or deficit, respectively. For the market of products used in telecommunication networks, the UK has always had a coverage rate below *** with a trade balance always in deficit.

Exports, Imports, Coverage rate of telecommunication network products UK, ****-****, in millions of dollars and percentage Source: ****

In ****, exports amounted to ** thousand kilograms of exported ...

1.5 Consequences of the COVID-19 pandemic

With the COVID-** pandemic, a large portion of the population had to work from home. This phenomenon, together with the increase in video calls, led to a considerable increase in the use of data services consumption. As a result, there was increased pressure on service providers to provide better quality of service, security and to roll out *G sooner.

A figure, from Ofcom, reveals that the average monthly data volumes grew in **** between mobile and fixed broadband connections. Specifically, the average monthly data consumption on mobile grew by **%, and is *.* GB per month, while on fixed broadband consumption grew by *%, and is *** GB per month in ****. In ****, on the other hand, due to the pandemic, monthly consumption on fixed broadband grew by **% compared to ****.

Average fixed broadband data use per month UK, ****-****, in GB Source: ****

In ****, globally, companies' spending on security technologies was mainly on DevSecOps tools, data discovery and classification, network security (***), endpoint security and SSO in the cloud [***]. 

In the UK, ** per cent of the adult population used personal smartphones for work purposes in ****. This figure, in accordance with global forecasts, is expected to increase as more companies are opting for hybrid working. In contrast, a figure from ...

2.1 Demand characteristics and drivers

It is now clear that the demand for telecommunications networks is constantly growing. This increase is due to a variety of reasons, including:

UK population growth

The growing population in the UK is increasing the demand for mobile and other devices with which information is transmitted via an internet connection. In addition, users demand increasingly customized services that can distinctly meet their specific needs. 

UK population projections UK, *****-*****, in million Source: ****

Growth of mobile devices and users in the UK

Over the years, the number of people and companies using mobile devices (***) has increased worldwide. So has the dependence of individuals on devices for communication. The main uses include communication via voice, email, chat, instant messaging, social media and video conferring through applications such as WhatsApp, WeChat, Viber, Zoom and many others. Looking at the graph below, one can see that the number of devices is much higher than the number of users, as more devices are used by the same user [***]. 

Mobile users and total mobile devices World, ****-****, in billions Source: ****

Furthermore, in ****, the average number of mobile phone service subscriptions was ***.** per *** inhabitants. This figure, released by ITU, shows that there were individuals with more than one ...

2.2 Coverage and premises of telecommunications networks

The demand for coverage of different telecommunication networks varies in different parts of the country. In general, urban areas need better coverage than rural areas such as Scotland, Wales and the North East. The reason is that urban areas have a higher concentration of inhabitants, economic activities and government offices that make much higher use of data. 

The table below, updated with **** data, shows the coverage of Gigabit-capable and full fibre networks, both fixed broadband, in different areas of the UK. Also shown in round brackets are premises (***) in millions.

Source: ****

2.3 Wireless technology innovation: 5G networks

For many people, it has become essential to connect to the Internet and to have a fast and secure connection. Towards these goals, manufacturers seek to develop increasingly innovative technologies and service providers seek to deploy these technologies in their networks. This push for innovation stems from the high user demand for faster, more secure and reliable networks because users want to communicate faster and to protect their information.

The *G network, which started as a mobile network technology, is much faster and more reliable than the previous *G network. In ****, the *G network in the UK had an average download speed of **.* Mbps compared to the *G network's ***.* Mbps [***]. 

With the exception of China and the US where the number of cities covered by the *G network far exceeds the number of cities covered, the UK ranks among the top countries for *G network deployment, having ** cities covered by the *G network.

Number of cities covered by *G network World, ****, in absolute value Source: ****

Today, the UK is committed to the implementation of *G. In ****, the cumulative costs reached EUR *,*** million. Furthermore, these deployment costs are expected to increase by ***.* per cent in **** compared to ****, reaching EUR **.*** million in ****.

Cumulative ...

3.1 Structure of the telecommunications network industry

Telecommunication is an asset-intensive and competitive market. The reason is that network infrastructure includes all the hardware resources of service providers, but also enterprise networks. Thus, routers, switches, broadband access, optical transport, enterprise telephony, storage area networks, infrastructure firewalls and many others. In the case of service providers' networks, they provide services to a large number of users scattered over long distances. In the second case, on the other hand, an enterprise's network provides services to a limited area, often a work building for example. Consequently, the size of the infrastructure changes considerably, as do the costs for its installation and maintenance, which must be done regularly.

In general, telecommunications companies need to invest billions of euros in capex for the construction of networks and their component parts such as mobile towers, and fibre networks. Furthermore, in order to achieve results and recoup investments, companies need long time frames. For example, Capgemini writes that a fibre network's break even period is estimated to be around **–** years [***]. The constant need to retrofit networks to new technologies and the power of Over the Top (***) players make the success of entry-level and early-stage companies more complex. Consequently, generating good return on investment ROI for ...

3.2 Installation process

Before ****, the telecommunications industry was run by the government. As in a monopoly, the General Post Office GPO was the organisation that serviced the country. Today, the telecommunications industry is a more competitive market than for example ** years ago when there was only BT providing landlines in the UK. There are more telecom network providers, thanks also to the developments made in information technologies [***]. Before showing what the installation of networks consists of, a telecommunications network consists of two parts:

The core network, consisting of numerous buildings (***) connected together by transmission systems. The local or access network, consisting of copper or fibre cable links between customer buildings (***) and the local telephon exchange building.

Each telecommunications network company has its own core network and access network. BT is the company with the most extensive network in the country [***]. 

Installation process

Source: ****

The last step is the most important one as the software is installed and the appropriate configurations are made with subsequent testing.

3.3 Supply chain and distribution channels

Source: ****

Telecommunication operators can therefore obtain revenues by selling their services in different markets. Below, one can see the revenues in the UK of both wholesale and retail telecom operators. In both distribution channels, there has been a decline in sales compared to ****. In fact, in ****, there was a drop of almost **% for retail revenues and a drop of **% for wholesale revenues in pounds compared to ****.

Retail revenue of telecom operators UK, ****-****, in billion GBP Source: ****

Wholesale revenue of telecom operators UK, ****-****, in billion GBP Source: ****

3.4 Main Players

In the UK, telecommunication networks are installed by several telecommunication companies and operators, both national and international. Among those operating in the UK, the most important are BT Group, Sky, Virgin Media, TalkTalk, Vodafon and EE [***]. Each specialises in something. For example, BT provides fixed-line and mobile services, as does EE (***), whereas Virgin Media provides broadband, digital TV and mobile phone services, TalkTalk provides broadband and fixed-line phone services and Sky offers television and broadband services. Vodafon is a British company that operates internationally and offers mobile and fixed-line telephony and broadband services. More details on the providers can be found in the section on fiches enterprises. An important feature is that these companies together with other smaller companies may work together to provide coverage and connection to the largest networks to customers in the UK. The reason for this is that each company specialises in one or more of the segments, and should it wish to offer a service that relies on networks it does not own, it is cheaper to pay another provider than to build and install a telecommunications network.

The graph below shows the largest internet service providers (***) according to their market share in the UK in ...

4.1 Typology of the offer

There are different types of telecommunications networks, of which the most important are:

4.2 Costs of network installation and management

It is complicated to quantify expenditure on telecommunications infrastructures, given their complexity in terms of equipment and the amount of other elements required for their implementation. The graph below provides a global overview of how much telecommunications companies have spent of their capital on telecommunications infrastructure, IT infrastructures (***) and hyperscale infrastructure. Hyperscale infrastructure refers to a distributed computing environment consisting of a mix of hardware and servers. The graph shows that, in ****, Telco capex amounted to USD *** billion, which is little changed from ****. Hyperscale capex, on the other hand, increased by **% from ****, reaching USD ** billion in ****. This figure shows an increased interest in companies in the development of Hyperscale and management of vast data. 

In general, ethernet networks are less expensive than fibre optic and VSAT networks, while wireless networks are less expensive to set up and maintain than ethernet and fibre optic networks. 

Telco and hyperscale infrastructure spending capex World, ****-****, in billion US dollars Source: ****

Nationwide

Looking at the report of one of the most important companies in the UK, BT is sharply focused on network investment in the UK and also on improving customer services. The company knows that bringing about a transformation of the UK's digital infrastructure ...

5.1 Regulatory framework

The Communications Act ****

This act, which replaces the previous Telecommunications Act ****, is important because it establishes Ofcom as the regulator for the broader communications industry. Prior to this act, there was a licensing regime for telecommunications. Today, however, general licences are granted to telecommunication service providers, who must comply with the conditions set out in the licences in order to operate in the English market [***].

In particular, Condition *.* to providers of fixed telephony, which is part of the proper and effective functioning of the network, specifies that the Communications Provider shall take all reasonably practicable steps to maintain:

the proper and effective functioning of the Public Telephone Network provided by it at fixed locations at all times in the event of catastrophic network breakdown or in cases of force majeure, the availability of the Public Telephone Network and Publicly Available Telephone Services provided by it at fixed locations uninterrupted access to Emergency Organisations as part of any Publicly Available Telephone Services offered at fixed locations. 

Electronic Communications and Wireless Telegraphy Regulations ****

The UK used a legal instrument to transpose the EECC (***) Directive into UK law after leaving the European Union. With these regulations, the UK incorporated the EU Common regulatory ...

6.1 Segmentation

• Vodafone
• O2
• Sky
• TalkTalk
• BT