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| Industry losing shine and facing uncertain future? |
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| Friday, 11 May 2007 | |
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Lacklustre 2006 performance by annual IDATE DigiWorld survey with the possibility of worse to come…
The growth potential of emerging markets is attracting interest from major Western mobile operators. This was exemplified by Vodafone’s late year bid for Hutchison Whampoa’s 67% stake in India’s fourth largest operator, Hutchison Essar. This deal comes on the heels of Vodafone’s sale of its minority holdings in mature markets, namely Belgium (Proximus), Japan (Vodafone Japan) and Switzerland (Swisscom Mobile). Thanks to this acquisition and others, including its takeover of Turkish telco Telsim in May, Vodafone has announced that in five years’ time, emerging markets will account for a third of its profits. Going global is the response from Western European operators to the threats they are facing in their home markets. According to DigiWorld 2007 there are four key challenges facing European telecoms: usage, growth, globalisation and regulation. Chapon describes the usage challenge as being like an iceberg: the tip (above the water) is voice where there is little or no growth and revenues are threatened by multiple alternatives and technology disruptions; and usage growth is in the part of the iceberg below the waterline which is mainly new communications mediums such as e-mail, Instant Messaging and P2P VoIP which are not easy to monetise through traditional pricing models. The growth challenge is driven by market saturation and a shift to revenue models that impact on industry growth prospects. “The market is shifting from strong scarcity in the PSTN to strong abundance in the IP world,” comments Chapon. The impact of globalisation is to make regions other than Europe more attractive to investors and this in turn is leading to the creation of new industry giants able to challenge the traditional players. Emerging vendors are already making their mark in the fixed infrastructure market whilst emerging carriers are profitably scaling up in low income countries. And finally there is the regulatory challenge where, says the report: “The multiple and sometimes conflicting objects pursued with imposed vertical separation have largely not been met and a detailed impact assessment reveals negative impacts at the industry level.” The report does say that ‘voluntary separation’ can create shareholder value, citing British Telecom as a good example of this situation. Telepocalypse then? Looking ahead to 2015 IDATE speculates on possible futures for European telecoms. The first scenario is described as ‘Telepocalypse’ where: there is a ‘Mexican standoff’ between carriers and regulators for new infrastructure investment there is sporadic broadband availability telco service revenues are decimated by free online competition the industry revenue decline triggers competitive shakeout In the more cheery second scenario of convergence/compromise, the following obtains: tiered basic and premium converged applications coexist there is very high broadband penetration in dense areas for corporate markets moderate growth produces contrasted strategies;specialisation or European integration there is infra competition in dense areas and local loop unbundling elsewhere In the final potential scenario, dubbed ‘Evernet’ by IDATE, you’ll find: new B2B and public admin e-services create deep productivity gains and social benefits there is ubiquitous very high speed fixed and mobile broadband there are ample growth opportunities for both application and infrastructure providers and there are ambitious R&D public policy stance and investment incentives Which scenario do you think the industry would like to see becoming reality in eight years time? Ian Channing |
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