Telecom Carriers Face Declining Revenue Growth In Core Businesses - InformationWeek

InformationWeek is part of the Informa Tech Division of Informa PLC

This site is operated by a business or businesses owned by Informa PLC and all copyright resides with them.Informa PLC's registered office is 5 Howick Place, London SW1P 1WG. Registered in England and Wales. Number 8860726.


Telecom Carriers Face Declining Revenue Growth In Core Businesses

Gartner says year-over-year growth of total revenue from telecom services will shrink to just 1.7% in 2010, with actual revenues increasing to $1.5 trillion in 2010 from $1.3 trillion in 2006.

As telecom carriers strive to become full-service providers delivering mobile broadband and Internet-related services, it's likely they will experience a rapid decline in revenue growth, a market research firm says.

Year-over-year growth of total revenue from telecom services will shrink to just 1.7% in 2010, with actual revenues increasing to $1.5 trillion in 2010 from $1.3 trillion in 2006, Gartner said Thursday. As a result, carriers will spend more on new markets, such as media and information technology, to compensate for revenue losses in traditional telecom services.

Examples of companies investing in non-core services include Telecom Italia's transformation into a media company through agreements with Fox, MGM, and Sony, Gartner said. The deals have Telecom Italia distributing content to increase the demand for its higher fixed-broadband connections.

In another example, BT Global Services has partnered with Hewlett-Packard for integrated IT services, a step towards hosting BT's application and managed services business. Finally, SK Telecoms has entered the content-creation market through the acquisition of Korea's largest music recording label, YBM Seoul Records.

Gartner expects more than half of these new approaches to fail, because carriers have a limited knowledge of the existing subscriber base, and often don't understand the new business models.

"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," Gartner researcher Martin Gutberlet said in a statement.

As a result, Gartner is advising carriers to carefully define risk mitigation and potential exit strategies. "It will take more than just hiring a few media or IT executives for carriers to succeed in these new markets," Gutberlet said.

Rather than spend a lot of money on non-core products, Gartner believes carriers should improve on the services they already provide in order to get more money from the existing client base. For example, carriers could improve network access activity and become a pure connectivity provider.

"Carriers looking to safeguard their (albeit slimmer) profits could do a great deal worse than becoming a really excellent bit-pipe," Gartner analyst Nick Jones said. In addition, they could embrace Internet-based services and become an aggregator, focusing on making it faster to access Web content rather than creating it.

For enterprises, Gartner warned that carriers would likely be offering more complex bundles, making service selection and contract negotiations more difficult. As a result, enterprise buyers should evaluate carefully the value of commercial bundles to avoid buying unneeded services.

We welcome your comments on this topic on our social media channels, or [contact us directly] with questions about the site.
Comment  | 
Print  | 
More Insights
Top 10 Data and Analytics Trends for 2021
Jessica Davis, Senior Editor, Enterprise Apps,  11/13/2020
Where Cloud Spending Might Grow in 2021 and Post-Pandemic
Joao-Pierre S. Ruth, Senior Writer,  11/19/2020
The Ever-Expanding List of C-Level Technology Positions
Cynthia Harvey, Freelance Journalist, InformationWeek,  11/10/2020
White Papers
Register for InformationWeek Newsletters
The State of Cloud Computing - Fall 2020
The State of Cloud Computing - Fall 2020
Download this report to compare how cloud usage and spending patterns have changed in 2020, and how respondents think they'll evolve over the next two years.
Current Issue
Why Chatbots Are So Popular Right Now
In this IT Trend Report, you will learn more about why chatbots are gaining traction within businesses, particularly while a pandemic is impacting the world.
Flash Poll