New smartphones and 5G drive annual growth in telecommunications advertising market

Spending on telecommunications advertising in the 12 key markets included in the report will grow from USD 17.8 billion in 2020 to USD 18.7 billion in 2021. In 2022, the pre-pandemic level of USD 19.5 billion will be reached again.

Smartphone sales will pick up again this year once consumers have more confidence in their future. Consumers are increasingly willing to finance and buy handsets independently of their network operators, giving manufacturers and retailers a greater incentive to promote the devices themselves. In the meantime, telecom providers will try to recoup their investments in 5G licenses and infrastructure through new services and more expensive data packages.

All of these trends are expected to contribute to healthy growth in the global telecommunications advertising market over the next three years. Zenith forecasts that telecom advertising spend will grow by 4.7% in 2021, 4.4% in 2022 and 4.3% in 2023.

"In our market, the recovery of the advertising market in the telecommunications sector is not quite as dynamic," explains Maria Brinkmann, Managing Director of Zenith Switzerland. "We don't expect to reach the advertising pressure level of 2019 again until 2023. Our current market developments play a major role here. On the one hand, the merger of UPC and Sunrise will give us a communications boost this year, but on the other hand, it will also mean the loss of a player in the following years, leaving us with just Swisscom, Salt and the new merged company," explains Brinkmann.

Digital platforms help Telkom brands to show relevance

Voice and data services are taken for granted and are functionally indistinguishable for consumers. They expect these things to work perfectly in the background and only pay attention to them when something goes wrong.

With attention-grabbing advertising in mass media such as TV and radio, telecommunications companies can use branding to set themselves apart from others and increase their relevance for consumers. Here, brands try to promote associations with topics that consumers are passionate about, be it entertainment, sport or music. Telecom brands therefore spend significantly more on TV and radio advertising than the average brand - in 2020, they spent 42% of their budgets on TV and radio, compared to 30% for the average brand.

As audiences migrate to digital channels, telecom companies are focusing on communicating their brand messages to mass digital audiences. While telecom brands are spending less on digital media than the average (49 percent of their budgets went to digital channels in 2020, compared to 56 percent for the average advertiser), digital advertising is also the only channel where the industry's ad spend is currently increasing. Zenith predicts that telecom brands will increase their digital ad spend at an average rate of 5 percent per year between 2019 and 2023. By 2023, digital advertising will account for 54 percent of all telecom advertising.

"In Switzerland, too, the advertising market growth in this sector is coming primarily from digital channels," explains Maria Brinkmann. "We expect a year-on-year increase of 17% here alone in 2021."

Telecom brands are cutting their spend on traditional TV and radio as their reach declines, but less rapidly than brands in most other categories. Zenith predicts that telecom brands will reduce their TV ad spend by an average of 2.0 percent per year between 2019 and 2023, compared to an annual decline of 3.5 percent across all categories. The industry will also reduce its spend on radio advertising by 2.8% per year, compared to 4.1% per year for the overall market.

India and Russia lead growth

Zenith predicts that India will be by far the fastest growing market for telecom advertising between 2020 and 2023, with an annual growth rate of 11 percent. According to eMarketer, only 31 percent of the Indian population currently has a smartphone, but with the introduction of low-cost phones such as the JioPhone, this proportion is rising rapidly. Russia is another market with a relatively low but rapidly growing smartphone penetration (57%). Here too, a rapid increase in telecommunications advertising expenditure of 8% per year is forecast.

Annual growth of between 3% and 6% is forecast for most other markets included in the report until 2023. The exception will be France, and not because of any inherent weakness in demand. Unlike most markets, French telecom brands actually increased their spending in 2020 - by 6% - in response to additional demand for data volumes. The basis for comparison with 2023 is therefore much higher, which is why growth is lower.

"The introduction of 5G services will enable mobile operators to deliver bundled voice, data and entertainment services to the home and compete directly with fixed broadband," explains Jonathan Barnard, Head of Forecast at Zenith. "This will trigger greater competition for the most attractive services at the best prices and help to drive a sustained recovery in advertising spend in the telecoms sector until at least 2023."

The 12 markets that Zenith Business Intelligence - Telecommunications Report The countries included in the analysis are Australia, Canada, China, France, Germany, India, Italy, Russia, Spain, Switzerland, the UK and the USA, which together account for 73 percent of total global advertising expenditure. Telecommunications is defined as services and devices that enable the transmission of voice calls and data over fixed and mobile networks.