Mobile data undermines legacy business: analyst

Joseph Waring
09 Sep 2010
The growth in mobile broadband is undermining existing revenue streams such as voice and SMS, which account for 70% of sales and ebidta, according to a senior telecom analyst.
William Bratton, Deutsche Bank's director of Asia telecom research, told an LTE conference in Hong Kong Wednesday that the underlining economics of data were not great. “Which is why how you make them better is a big issue for the telco sector.”
He said operators have to work harder for lower returns because data revenue is lower quality than their existing revenue base. "The margins and returns on data revenue appear to be lower than those on their voice and SMS revenue that they are suppose to replace."
He said margins have been falling every year for the past five years and ebidta growth was just 1.9% in H1. "We're on a systematic downward margin curve because new revenues are not as good as the revenues they are replacing."
The fixed-line business has experienced the same. He said products introduced to offset declining circuit-switch voice revenue tended to be lower margin than existing PSTN revenue.
"A good example is pay television. It is one of the worst business cases for the telco sector. Yet they feel they have to do it so they have revenue growth."
Until recently, Asian telcos have been a great growth vehicle, and the financial community has loved that story. “But growth is leaving the sector at an incredibility rapid rate,” Bratton said.


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