Airline turmoils and ash clouds may have dominated the news this week but there was some other worrying news for the telecommunications industry that may have missed closer attention.Â Despite weathering the massive economic downturn of the past two years and showing continuing strong results some major CSPs are now reporting flat revenue growth and even lowering estimates for the coming year, defying the recovery.
How can this be and what are the issues? Now doubt there are many factors that come into play and these vary from market to market but it appears those worst affected are dominant players operating in a singe market. The overhead of legacy systems, saturated and even stagnating markets and lack of willingness by boards to commit to much needed transformation and upgrading projects during the recession may all be contributing factors.
Single technology network and fixed-line operators appear to be the most susceptible to flat growth and no wonder, with the pressure of wireless and NBN networks looming large. Competition in all markets is pushing prices down and with it, profitability. Even where there is revenue growth it is not always accompanied by profit and the usual response to appease shareholders is to reduce costs, quickly, and that usually translates to drops in head count. This leads to higher workloads for those remaining and then productivity suffers and the cycle becomes self-defeating.Â In the worst cases, employees so frightened of losing their jobs work themselves literally to death, or suicide, to be more accurate. Thatâ€™s not being sensational, it’s a fact of life, sadly illustrated by the recent France Telecom tragedy.
There is probably no single panacea to the issues raised here but it does seem that a major change in thinking may be required and, perhaps, a new age of managers that understand what the markets want, are able to address those wants in a agile fashion are willing to take risks. The non-telco businesses that do understand the â€˜new ageâ€™ requirements are growing at an alarming rate and they are mostly internet-based. They need our industry to deliver their customers to them but if we donâ€™t keep up with their requirements they will probably do it for us, or at least acquire the means to do it.
Welcome to the new era of mergers and acquisitions, but this time it will be different. It wonâ€™t be telcos buying competitors and expanding international footprints which, to date, has seen mixed results. They are likely to be to objective for non-telco players. This time itâ€™s going to be about completing the end-to-end process by buying up all the pieces of the jigsaw to attract customers and keep them and it will see some very unusual marriages. Telcos tried it but they didnâ€™t quite get it right. Print content converted to electronic, movie makers marrying up with social communities, cloud providers buying the delivery chain to ensure access by their customers.Â It’s all about disruptive forces (need I mention Apple?) shaking us up.
Companies like Google and Skype that claim not to have any intention or desire to become telecommunications asset holders may have to change their minds to protect their positions and maintain the stellar growth they have become accustomed to. And amongst all of this, the regulators, governments and anti-trust gurus will have to try and exercise control.
Welcome to our â€˜brave new worldâ€™, are you ready for it?