|Tricky times for Telco’s|
|Written by David Brunnen|
|Friday, 04 May 2012 07:28|
The latest analysis from the Arthur D Little consultancy paints a sobering picture for European telecommunications incumbents (fixed or mobile) and an urgent need for them to pull their socks up.
The report, "Let's Face it", highlights falling core revenues for Telco’s and failures by Mobile operators to capture new service opportunities. There may be off-setting revenue gains from diversification into adjacent markets – but these seem unlikely to be enough to counter other losses.
The report holds out some hope for massive cost reductions and looks at the main strategic choices that will most probably change the entire landscape or seal the fate of under-performers in the next 3 years.
Three years, of course, is now an entire lifetime in the digital world. Forget the glorious evolutionary history and great technological achievements of ‘the last generation’. What we are now seeing is the dawning realization that our national all-IP digital futures (and the economic growth this enables) require only a fit-for-purpose network infrastructure to unleash services innovation – and that precious innovation is no longer rationed by the sector incumbents.
The report estimates that core telco revenues will continue to decline by nearly 2% p.a. until 2015. The strategic value of investment in higher quality digital infrastructure (super-connectivity) lies, for the fixed line telco, in their opportunity to muscle in on ‘Over-The-Top’ services such as IPTV (and, here’s the catch) if they are big and bold enough to collaborate with a massive global ecosystem of small developers and providers. In that sort of power play the Googles, Apples and Amazons of this world would strike hard bargains reflecting their dominance in markets that most incumbents have yet to understand.
Conversely, that glimmer of hope for the fixed line brigade is seen by Mobile operators as sapping yet more opportunities as they face up to further rounds of infrastructure costs in an attempt to match performance standards of FTTH services. Sure, there are niches in the endemic convenience of mobility and the failures of national governments to properly grapple with adequate universal access, but these barely compensate for the cost strains of new network deployments and the as yet unknown costs of spectrum licenses. The best hope for mobile operators is to move quickly into ‘monetisation’ of services – not least in developing the sort of money transfer/payment services that have proven so popular in places (like parts of Africa) with low banking penetration.
In a strange process of realization, the operators may look at diversification into adjacent markets – a sort of ‘too little, too late’ understanding of the cross-sector case for national infrastructure investment – but these revenues (estimated at between 4-9% of large telco revenues) will not be enough to reverse declines elsewhere.
The best bet for independent survival would seem to rest in a determined focus on rapid infrastructure investment – at about four times the current rate - in order to gain the opportunity to develop partner agreements in services and distribution.
It is perhaps not surprising that calls to become more competitive are usually answered with expectations of massive cost cutting – ‘austerity’ is everywhere.
Economic growth, however, requires the opposite of cutting back. That needs faith and belief that the digital world will be better. Not much sign yet at corporate or national levels that dealing with the digital deficit is seen as way addressing all the other deficits.
This editorial also appears at www.thecma.com for the benefit of members of the UK's Communications Managemnent Association - a part of the BCS, the chartered society for ICT professionals.
CMA members qualify for dicounted registration to NextGen roadshows and conferences. The next two events will be in Milton Keynes (30th May) and Edinburgh (7th June). The annual conference (NextGen 12) will be held in central London on 8th/9th October.
|Last Updated on Saturday, 05 May 2012 18:33|