ADL expects mega operators in telecommunication

24 July 2012

Europe's telecom sector will see core revenues decline by 1.8% per year up to 2015. Simultaneously, operators will face a decline in wholesale prices, rising taxation, increased competition from web giants and huge investments that are needed to stem the hunger for big data by consumers. Unless telecom operators make dramatic changes, including cost-cutting and moving into new sectors, they will face shrinking revenue and profit challenges. The warning is based on a study by advisory firm Arthur D. Little (ADL) and Exane BNP Paribas.

Large transformations and mega-operators

According Arthur D. Little soon a large turnaround will take place in telecommunication. "We're really now at a turning point... we need dramatic changes," said ADL director Didier Levy. Telecom operators need to accelerate their transformation programs in both operating costs (development and sales of online customer service, procurement optimization) in investments (consolidation / sharing networks). The pressure on cost optimization will also drive high merger & acquisition activity in the market. "The fundamental changes to business models required will lead to the emergence of mega-operators. Huge operators that share an infrastructure yet have the local expertise to service local customers".

From a growth viewpoint, the consultants identify two key revenue opportunities: monetization of data and entry into adjacent markets.

Arthur D Little - Telecom operators

Monetization of data

A key challenge for operators is how they can monetize their data services. On average, data represents 80% of traffic but only 20% of their income. In addition, the costs for building up and maintaining data services are in comparison much higher than the traditional voice-based services.

Adjacent market opportunities

"The New World" all IP "where" everything is connected "also creates opportunities for operators to enter adjacent markets such as automotive, energy, financial services, etc. The potential revenue from these new activities could reach 4-9% of sales of major telecom operators by 2015, a significant amount but still insufficient to reverse the overall negative trend. "


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