As revenue growth slows, operators diversify

Isabelle Paradis/Hot Telecom
04 Jan 2008

Growth in global telecoms services is forecast to slow to a five-year CAGR of 4.2% by end-2011, with revenue increasing by $347 billion to about $1.9 trillion. According to a report from Hot Telecom, telecom revenues increased 7.4% to $1.5 trillion in 2006 - down from 8.8% growth in 2005.

The slowdown in growth will be caused by the declining value of the fixed services market in a number of countries, increasing saturation in some mobile and Internet markets, and pressure on prices across all sectors. It's no surprise that mobile and internet services will generate an increasing share of the world's telecom revenue. The report forecasts that mobile revenue will surpass that of the fixed market as early as the end-2007.

The global aggregate number of fixed, mobile and internet subscribers increased last year by 15.1% to about 4.4 billion and is forecast grow further by 12.3% to five billion in 2007.

Although fixed-line subscriber expansion is slowing, the total number of fixed, mobile and internet subscribers is expected to grow by a CAGR of 8.6% over the next five years to 6.7 billion. New broadband and mobile connections will push this growth.

Mobile should remain one of the main drivers of growth in customers over the next five years. This sector, which peaked in terms of expansion in 2005 at a growth rate 25.6%, rose further by 23.7% to reach 2.69 billion customers in 2006. At that time, mobile penetration stood at 41.8%, a significant increase from 34.2% in 2005.

The report confirms that broadband will continue to be the fastest-growing telecom sector at an expected global CAGR of 14%. Broadband growth will come mainly from low-broadband-penetration regions such as Middle East and Africa, Latin America and Eastern Europe.

Asia is the largest region by far and now represents 45.6%, 38.4%, 40.4% and 37.1% of the world's fixed, mobile, internet and broadband subscribers, respectively. MEA will be the fastest-growing region in all sectors except internet, with forecast CAGRs of 4.7%, 18.7%, 13.8% and 34% in the same sectors.

Fixed/mobile/media consolidation is picking up pace, mainly in North America and Western Europe, where many of the main incumbents are expanding beyond their core services markets and where fixed-line operators are acquiring mobile or media companies to improve their positioning in what looks like an increasingly quadruple-play (fixed, mobile, internet and video) orientated market.

The increasing focus on IT services, content and applications for growth is pitting telcos against internet companies, system integrators, media companies and even telecom equipment manufacturers. In turn, many of those players have also entered the telecoms service market. In the next few years, the major players from these sectors will collide in an increasingly converging market.

Operators are also facing increased competition from system integrators such as IBM, HP and Accenture, which are entering the telco space as solutions providers capable of delivering communications as part of a wider ICT delivery project. In return, major global carriers such as AT&T, Verizon, France Telecom/Orange and BT will continue their pursuit of 'beyond telecom' acquisitions to gain IT solutions expertise and be able to compete.

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