Telco contracts show push to be agile, relevant

Adaora Okeleke/Ovum
08 Aug 2013
00:00

Telcos are facing slower revenue growth, resulting in a slowdown in capital investment. The Ovum report Telco Purchasing Trends (the third annual report in a series previously titled What Did Telcos Buy From Their Suppliers?) demonstrates how telcos are responding to these trends, and provides suppliers with insights into current and future telco purchasing trends.

Our analysis shows that telcos are reacting to the fierce competition in the industry by taking a lean and agile approach to product development and service operations. This is illustrated by their increasing investment in the evolution of their networks to meet the growing demand for data and data services, the drive towards proactive care, and the transformation of their overall business operations to focus on improved efficiency and the exploration of growth opportunities.

The need to drive more agile operations is also reflected in the gradual change of the supplier landscape. Within the IT domain, vendors with analytics and data skills have increased their contract wins by adapting their solutions to meet the telcos’ growing demands. However, the main network equipment providers (NEPs) maintained their lead positions in the network domain.

Capex growth has slowed across the board

Average capital expenditure grew more slowly in 2012, increasing by just 4% following growth of 15% in 2011. This slow growth in capex is a direct consequence of the reduction in the growth of revenues experienced by a majority of the telcos analyzed in Ovum’s report.

Much of this slowdown is due to the poor economic conditions in Europe, competition from new entrants, competition from OTT players offering cheaper substitute services, and unfavorable regulatory conditions. As a result of the reduction in revenues and the slowing of capex growth, fewer contracts were awarded in 2012 than in 2011.

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