The communications sector is comprised mainly of telecommunications and broadcasting services. These services have expanded from telephone and cable provision to a vaster collection of networks including satellite and wireless communications.
The importance of the communications sector has grown as technology advances across all industries. Global networks facilitate essential applications such as long-distance communication, data collection and transmission, and automation. These functions have been fundamental to the efficient functioning of modern businesses. Geographic revenue data reflects the broad, elemental importance of communications services across consumer and business categories. Economic growth and currency fluctuations are major drivers of geographic exposure trends that are shaping forecasts for 2016.
Global communications sector revenues were most heavily exposed to the United States in 2015, with 26.5% of sales. China was the second-highest exposure at 15.3% and Japan was third at 10.4%. Germany, Brazil, Canada, the United Kingdom and Russia rounded out the top eight in that order, with exposures ranging from 2.4 to 3.8% of global revenue. Communications are essential to almost every business function, so this list is highly correlated to gross domestic product (GDP) rankings, with all of the top eight contributors placing within the top 12 largest economies. Country-level exposure to the energy, information technology and financial services sectors also influences communications revenue because these categories are heavy consumers of communications services. The geographical distribution of sales in the communications sector is more similar to sectors such as industrial goods and consumer staples than it is to technology or consumer services. This indicates that demand for communications services relies less heavily on disposable income.
The Asia-Pacific region led global communications sector revenues in 2015 with 37.7% exposure. The Americas followed closely at 35.8%, and Europe was somewhat lower at 21.6%. Africa and the Middle East contributed only 4.2% of worldwide sales in the year. This distribution reflects the contribution of the largest countries, which tend to dominate revenue exposure. It also highlights the importance of GDP as a determining factor, since the leading regions have both very large populations and rich nations. Developed countries accounted for 62.2% of 2015 sector revenues, while emerging markets contributed 32.4%.
Growth Rates and Forecasts
U.K. communications sector revenue exposure declined 14.7% in 2015, the fastest decline among major contributors. This decline reflects the continuation of the nation's five-year downward trend for average monthly household spending on communications. Canada experienced an 8.9% contraction, with the energy sector creating a drag on demand in the country. Russia's exposure fell 7.3%, and Japan's fell 7%, as both countries dealt with currency depreciation. The factors influencing downward trends in these economies were not universal.
The United States experienced 7.4% exposure growth, sustaining an upward trend. The country's contributions to global revenue were supported by a strong dollar and positive economic fundamentals. China and Germany both experienced more modest growth, despite dealing with currency headwinds.
Analysts expect the Americas to experience the most exposure growth, with forecasts calling for 170 basis point gains to 37.5%. The Asia-Pacific region is only expected to cede 10 basis points, while Europe is looking at a more severe decline of nearly 150 basis points. Stable economic growth in places such as the United States and relatively strong currencies are driving expansion in the Americas. Rebounding energy prices should also help. The situation in the Asia-Pacific region is less uniform, but the overall trend is slightly negative, with currency depreciation playing a major role. Europe is more uniform due to its large monetary union, though economic performance is mixed across its largest constituent nations. The balance of revenue mix between developed and emerging economies is expected to stay mostly unchanged in 2016.