The telecom industry is often compared to utilities in having stable cash flows. Soon, however, this may no longer be the case; operators risk losing half their existing cash flows unless they take action now.
Delta Partners, the leading TMT advisory and investment firm, today released its latest white paper, titled “The Future of Telecoms: New models for a new industry.” The paper assesses key industry trends, the resulting challenges faced by operators, and possible solutions.
Few industries will have to re-invent themselves as much as the telecom industry must in the next 10 years.
Its largest revenue contributor, voice services, is set to decline from a share of 50% to only 30% by 2020. At the same time, data growth will continue to explode in the next 10 years through rapidly growing internet and smart device penetration. This results in two fundamental industry shifts:
- Shift in revenue mix and growth: The industry is set to grow from $2 trillion to $3 trillion by 2020 but with data-centric services like broadband, M2M and ICT/Cloud to drive 90% of the growth
- Shift from higher to lower margins: These new data-centric services have generally lower margins than voice and SMS at below 30% and as the revenue mix shifts, this is likely to result in margin dilution
“These two fundamental shifts have severe implications on Telcos’ future cash flows,” says Juan Rio, Partner at Delta Partners. “Operators that do not expand beyond voice will see stagnant revenues and a cost explosion from dealing with data growth, which unless addressed could halve cash flows. New business models need to be adopted to succeed in this new industry.”
The global telecom industry is at a crossroads, requiring new models for a new industry.
“In order to tackle these challenges, operators need to be clear on their strategic intent. Should they adopt a high-risk, high-investment approach to compete with new agile competitors like Apple and Google in the expansion of the value chain?” adds James Ong, Manager at Delta Partners. “Or should they take a low-risk strategy of focusing purely on 'dumb' connectivity, but at world-leading efficiency?”
To continue reading: http://www.deltapartnersgroup.com/about_us/media_center/press_releases
To download the white paper: http://www.deltapartnersgroup.com/our_insights
For media inquiries: Mia Mutic (mmu@deltapartnersgroup.com)Delta Partners,+971 (4) 369-2999
www.deltapartnersgroup.com
Contacts
Mia Mutic,
Delta Partners,
+971 (4) 369-2999
mmu@deltapartnersgroup.com/ www.deltapartnersgroup.com
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