11 Jun 2010
Dig deep enough into carriers' financials and you uncover a grim reality: Revenue from once-lucrative wholesale telecom services has shriveled up over the past three years. If Tier 1 operators want to recover the billions of dollars that those units used to reel in, their approach to wholesale will have to mirror their consumer and enterprise strategies -- focus less on access and more on services.
"Our business is very different than what it used to be. I would say in the past, we were like every other traditional wholesaler. We looked at excess capacity in our network operations, priced it per bit and took it to market, and if somebody was interested, we'd gladly provide it to them and say, 'Have a good day,'" said Mike Smith, director of business development for Sprint Wholesale Solutions. "But we are clearly looking to grow this part of our business and … have consciously transformed that model."
The numbers show just how well that traditional strategy worked among the top three US carriers.
- According to its annual reports, Verizon's wholesale business raked in $10.75 billion in 2007, amounting to about 12% of its total revenues. Last year, it reported $9.64 billion in wholesale revenue -- a 10% drop. Wholesale fell to 8.9% of total revenue in 2009.
- Sprint Nextel Corp. suffered dramatic losses to its wholesale revenues, which plummeted 49% from $1.06 billion in 2007 to $546 million in 2009, according to its annual reports. Wholesale telecom services made up 3.3% of total revenue in 2007 and dropped to 2.1% in 2009.
- AT&T's wholesale revenue has remained somewhat flatter, according to Paris Burstyn, senior analyst at Ovum. The carrier accounted for revenue from its wholesale telecom services in the same category as revenue from "government, education medical solutions" in 2009, which totaled $18.5 billion together. Ovum estimates $14 billion made up wholesale revenue, Burstyn said. AT&T accounted for wholesale revenue separately in 2007, reporting the unit made $14.06 billion. Over that period, the unit went from constituting 11.7% to 11.4% of total revenue.