CEOs report earnings outlook of more than 10 percent over next 3 years: KPMG IMC report

The COVID-19 pandemic, work from home and social distancing have underscored a new urgency for digital connectivity and innovation— bringing in an era for the Technology Media and Telecom (TMT) sector, that may last well beyond the pandemic. Post COVID-19—TMT is going to be very much at the fore front of everything we do. It will be the competitive differentiator for how all businesses and ecosystems work. The advent of technologies such as AI, IoT, AR and VR, has today brought into reality the feasibility of conducting online business for sectors such as education, healthcare, consulting, retail, all of which were mainly centered around personal interaction.

To understand the impact, the crisis has had on TMT organisations, how they are thriving in what is the “New Reality” and how TMT CEOs are harnessing the next wave of growth empowered by the digital revolution in the nation, KPMG in India in association with IMC (India Mobile Congress) and COAI (Cellular Operators Association of India) launched a report titled ‘TMT Industry CEO Outlook: Smart. Secure. Sustainable’ at the India Mobile Congress 2020. The report is based on a survey of 300 TMT CEOs from India - a mix of executives from fortune 500 companies and startups. It captures perspectives and views from CEOs on the challenges and opportunities brought about by digital acceleration as well as how the TMT industry is digitally empowering businesses to ensure future survival and gain a competitive edge on a global scale.

Key highlights from the KPMG IMC survey report

Economic Outlook

The upsurge in demand from both end-users and businesses during the pandemic has reinforced the surveyed TMT CEOs’ positive outlook on the growth of the sector

Companies are capitalising on India’s growing digital economy and witnessing increase in revenues as well as private investments

52 percent CEOs seemed very confident about the growth prospects for the TMT sector

61 percent of CEOs reported an earnings outlook of more than 10 percent over the next three years.

However, to sustain this momentum and steer it further forward, the government and TMT organisations need to find newer and deeper ways to collaborate

Transforming the Life of a Digital Customer

Six out of ten digital transformation leaders are accelerating initiatives around connecting front, middle, and back offices and the drivers for transformation are largely customer focused. While 42 percent have a focus to reduce and regain the loss of revenue, 33 percent of them have also suggested to develop newer channels to serve customers

52 percent of the CEOs surveyed said that initiatives around digitization of operations and the creation of a next generation operating model got acceleration because of the pandemic

25 percent CEOs mentioned lack of insight into future operational scenarios as one of the key challenges faced in accelerating digital transformation

Other emerging technologies

With the acceleration of digital transformation initiatives across industries due to the pandemic, businesses are assessing the potential of emerging technologies to enhance their business and operational processes. Prior to COVID-19, investments and business priorities related to emerging technologies were fragmented

However, enterprises are now focused on aligning their emerging technology strategies with the overall business objectives to ensure not just future survival but also simultaneously gain a competitive edge

The survey also tried to identify those technologies generating the most impact and ones seeing maximum investment. The survey revealed that while India Inc.’s current table stakes are on data analytics and cloud, it is IoT, blockchain and AI that are projected to be strategic investments with robotics and AR/VR emerging as the future stars.

More than 300 CEOs from India were reached out through this survey. Executives from fortune 500 companies to start-ups participated in the survey conducted in the month of November 2020. The survey respondents comprised of 48% telecommunications, 45% technology and 5% from the media industry.

5G

According to our survey findings, industrial manufacturing, retail, and automotive are the top three industries expected to have the highest potential in terms of 5G technology adoption and number of use cases.

A comprehensive network reach, increasing affordability of smartphones and mobile data services, and change in the viewing habits, are currently driving data usage in India.

High speed data requirements propelled by the pandemic, are expected to drive 5G efforts in India.

4G/LTE is expected to remain the dominant mobile network technology by 2025, in the context of mobile subscriptions.

5G mobile subscriptions are expected to increase to 18 per cent by 2025. This is likely to be driven by an expected increase of nearly 410 million smartphone users in India by 2025.

Although telecom players are inking strategic deals with network infrastructure providers to bolster their ability to deliver 5G technology, the high price of 5G spectrum, significant infrastructure investment requirements, and regulatory policy concerns are impeding its commercial launch.

While India may not be among the front-runners globally for 5G adoption considering the current COVID-19 situation, elongated 4G monetization period and a hyper price-sensitive market, the country can potentially stand to benefit from a delayed adoption through the availability of more mature business use cases, numerous prototypes and a collaborative environment to ensure profitable and sustainable 5G deployment on a large scale.

Emerging Risks

The COVID-19 pandemic led to the emergence of specific, historically latent, risk factors that could however pose significant challenges going forward.

Ranking of top three perceived risks over next one year- 1- Supply Chain Risks (57 percent), 2. Operational Risk (43 percent) and 3. Cyber Security Risk (30 percent).

Ranking of top three perceived risks over next three years- 1- Regulatory Risk (50 percent), 2. Emerging Technology Risk (43 percent) and 3. Cyber Security Risk (43 percent).

More than 83 percent of CEOs surveyed had to rethink their global supply chain strategies due to the impact of the pandemic. An estimated 45 percent of the CEOs surveyed attributed the supply chain realignments to improve resilience against natural disasters.

40 percent CEOs wanted to reduce supply chain risk exposure.

TMT organisations recognize that effective cyber security is not only an obligation and an opportunity but also a risk. The urgent and increasingly sophisticated security requirements of enterprise clients and the chance to build end consumers’ trust through secure applications and communications are immediate opportunities for TMT organisations to explore.