Compared to many industries, the impact of the coronavirus (COVID-19) on independent telcos is relatively small. Restaurants are closed for dining. Hotels are empty. Flights are cancelled. Concerts and events are cancelled.
We can and should be grateful that we work in an industry where our livelihood has not instantaneously vanished. But that doesn’t mean our business is unaffected.
Over the coming days we’ll look at the impact from 3 angles:
- Network & services
But today we’re going to focus only on the financial impact.
Financial impact on telcos
While society as a whole still has a strong (and even growing) need for phone and internet service, there are many businesses whose operations are currently on hold – and the hit to their businesses will have a trickle-down effect on utilities like telecoms.
Check out this graph from homebase, showing business closures in major cities across the country. San Francisco dropped 64% in a week – and this data ends on March 18, so you can be sure things have gotten much worse since then.
If you live in a rural area then you may think things won’t be so bad for you, but if governors are ordering people to stay home then it’s going to affect everyone in a very dramatic way.
If you have business customers with factories, offices or retail stores that are currently closed, they are going to be struggling financially – and since they’re not currently using their phone or internet service, some of them will be asking you to put their accounts on hold, or even to cancel entirely.
On the plus side, any business that is considered essential (such as healthcare & food supply) will continue operating, and most office workers are transitioning to working remotely (and will still need phone service), but you’re going to get some service cancellations, and it’s going to hurt your cash flow.
More residential usage leads to increased revenue? Not really.
On the flip side, your residential customers will likely use more phone and internet service than ever. That sounds like it should increase revenue, right?
Well… that depends.
- Certainly, I would not be surprised if you find some subscribers asking to upgrade their internet bandwidth or their phone plan. If people are working from home, and they have kids home from school then bandwidth is going to be at a premium and I’m sure there will be more phone calls than normal. So some subscribers will increase their expenditure.
- However, those people who aren’t able to work remotely, or who work in industries that are heavily hit by these societal changes, may lose their jobs. They will be in a very tough spot financially, and while they’re unlikely to entirely cancel their service, they may struggle to pay their bills.
- The FCC is encouraging service providers to sign the Keep Americans Connected pledge, which basically asks that you don’t cut people off for non-payment or apply any late fees to their accounts.
So residential revenue is a mixed bag. Certainly there will be more demand, and those that can pay are likely to pay more, but you’ll also see cancellations, or at least non-payment from the more vulnerable members of society. It remains to be seen how these two factors will balance each other out.
What should we do?
For business users, I’d encourage you to be proactive in reaching out to see how you can support them in setting up remote working arrangements during this time (as I wrote about recently).
This shows that you care, builds your relationship with these valuable customers, and increases the chance that their businesses can be successful during this time.
For businesses that want to cancel service, you may want to offer some kind of discounted rate to freeze the account during the virus. It’s better to get 50% of your regular income than go to zero.
For residential users this would actually be a great time for a promotion to encourage people to upgrade their internet or voice plans. Those who can afford it are definitely aware of the limits on their current plans right now – and you should take the opportunity to maximize your revenue from these subscribers. Hopefully that revenue increase can offset lost revenue from those who can’t pay their bills.
This situation is hugely challenging for everyone, and it’s likely to continue for months – possibly many months. As network operators you are providing an incredibly important service to society, which is needed now more than ever. This is a time when we need to be smart and stay focused. If we do that, we can not only survive, but thrive.
In upcoming articles we’ll talk more about the risks and challenges for your overloaded network and (not least) how you can execute on all your plans while still keeping your workers safe.