Skip to main content

Gartner Predicts Telecom Future is Troubled

Mobile broadband, Internet Protocol (IP) technology and the desire to become full-service providers are increasingly driving telecom carrier strategies. However, according to Gartner, as they confront these industry upheavals, carriers face risks in building non-core telecom business units and over-investing in immature technologies.

Gartner believes that the reality for most telecom carriers is a future where they have to strive to be profitable on much lower margins than today. Historically, telecom carriers have been able to depend on high revenue growth from broadband or mobile services, but they now face the prospect of rapidly declining revenue growth.

Gartner predicts that year-on-year growth of total revenue from telecom services (80 percent of total global telecom market size) will shrink to just 1.7 percent in 2010. Gartner expects total telecom service revenues to rise only modestly over the next four years from $1.3 trillion in 2006 to $1.5 trillion in 2010. As a result, Gartner said that over the next few years more carriers will invest in new market sector, such as media or IT, to compensate for revenue losses in traditional telecom services.

However, Gartner warned that more than half of these new approaches will likely fail because many carriers have a limited knowledge of their existing subscriber base -- telcos think they understand customer needs, but they really don't. Also, they often don't understand the new business models they attempt to embrace.

"The synergies between the different business models and markets are very limited," said Martin Gutberlet, research vice president at Gartner. "This type of diversification carries a high risk of losing focus on today's core business priorities such as customer retention and cost cutting, with no guarantee of increased revenue growth in the long-term." Mr Gutberlet said that due to the high risk of failure, Gartner is advising telecom carriers to carefully define risk mitigation and potential 'exit strategies'.

These are certainly tough times for carriers, but the answer isn't necessarily to invest huge sums of money in new business models. Instead, Gartner recommended that carriers look for opportunities with existing customers as a less risky way of securing future revenues. Meaning, carriers should consider how they might improve on the services that they already provide in order to grow their existing client base.

Gartner outlined two potential scenarios for carriers who opt to develop opportunities within their existing customer base. The first option is to improve network access activity and become a pure connectivity provider. Carriers looking to safeguard their profits could do a great deal worse than becoming a 'really excellent bit-pipe'.

Alternatively, Gartner believes that carriers could choose to embrace Internet-based services and become an aggregator, concentrating on facilitating access to Internet content rather than creating it. Those carriers who do decide to diversify into new markets are likely to acquire companies to form new lines of business and Gartner predicts more partnerships between carriers and media or IT service firms.

Gartner advised carriers to separate network access and new non-telecom service units into individual companies so that they can be 'closed or sold' and to create partnerships for non-telecom services to share the risk. Perhaps IPTV services would be a good example.

From an enterprise point of view, Gartner warned that carriers will offer more complex bundles, which will make service selection and contract negotiation more difficult. It advised enterprise buyers to evaluate carefully the value of commercial telecom bundles to avoid buying extra services that are not needed. Clearly, these are troubled times for telecom service providers.

Popular posts from this blog

Linux Phone Standards Forum

A new Linux Phone Standards Forum (LiPS) has been founded to promote mass market adoption of Linux telephony terminals through standardization, interoperability testing and market education. The founding members include Cellon, France Telecom, FTM Labs, Huawei, Jaluna, Mizi, Open Plug and PalmSource. LiPS will support device manufacturers and operators in bringing to market Linux-based devices at lower cost (due to lower deployment costs through standardization), while facilitating the programming and development process for software and silicon vendors. The Forum said plans to work with other organizations such as the OMTP and OMA to identify requirements of distinct device categories including smartphones, feature phones, fixed-line, or converged devices. For each of these categories, or profiles, LiPS will define standard API�s that support relevant applications and services as well as a certification process for technology providers. In keeping with the open source philosophy, L

Cloud Services Gain New Momentum in Europe

Across European nations, more CIOs and CTOs are investing in public cloud services that become the essential foundation for the design and delivery of innovative digital transformation projects. Public cloud computing spending in Europe will reach $113 billion in 2022 and will double to $239 billion by 2026, growing at a 22 percent 5-year CAGR, according to the latest market study by International Data Corporation (IDC). Investments in Software-as-a-Service (SaaS) will continue to lead most of the spending in Public Cloud in Europe in 2022, but Platform-as-a-Service (PaaS) will be the fastest-growing segment. In fact, PaaS enables digital business deployment via the quick testing and production of new software applications. Public Cloud Market Development Professional services, banking, and discrete manufacturing will be among the top spenders in public cloud services, absorbing almost 60 percent of the overall public cloud services spend in 2022.  Human-centric industries are adjustin

Strategic Digital Transformation Spending Trends

Looking ahead, many Chief Executive Officers (CEOs) continue to selectively invest in new strategic digital transformation projects that enable a significant competitive advantage. Some additional investments may go towards improving existing IT infrastructure and operations.  Worldwide IT spending is now projected to total $4.5 trillion in 2022 -- that's an increase of 3 percent from 2021, according to the latest updated estimate by Gartner. For now, most CIOs will be relieved that their budget is safe from major cuts. While IT spending is expected to grow in 2022, it will be at a slower pace than in 2021 -- partly due to a 5 percent cutback on spending for personal computers, media tablets, and printers. Digital Transformation Market Development "Central banks around the world are focusing on fighting inflation, with overall inflation rates expected to be reduced through the end of 2023. However, the current levels of volatility being seen in both inflation and currency exch