Telecom may not grow much over the next 18 months, but analysts at OSS Observer say it is unlikely to shrink. And based on that and a solid historical perspective, the TM Forum said in its Business Benchmarking Industry Report that it is no time to shrink from the challenge either.
Just prior to reality setting in on the economy around October, OSS Observer (now an Analysys Mason company) analysts Roz Roseboro and Larry Goldman said the growth rate for service provider revenue, which had been growing at about 7 percent per year, would drop to 5 percent. The firm has since lowered that expectation by as much as 2 to 4 percent.
Some sectors will fare better than others as trends such as wireline replacement accelerate, especially as it is replaced with wireless, but the overall growth rate won’t dip into the negative. Historically, telecom services revenue has never declined in the history of the U.S. and European markets.
“Looking at historical data, it is hard to detect a recession in the U.S. economy based on telecom service revenue. It marches along at a pretty steady state,” Goldman said. “So we’re not expecting revenue to go off the cliff, or even decline.”
That phenomenon held true this week. “If you didn’t know there was a recession going on, you wouldn’t know it by Verizon’s numbers, Goldman said.
Even wireless voice will grow at about 4 percent in mature markets, but wireless data is projected to grow by as much as 20 percent by 2012. Developing markets may take a hit, but their market share won’t be enough to move the overall revenue needle into the red for the industry.
Obviously, some mature wireless operators will feel more pain. “Recession or no, Sprint is in trouble,” Goldman said. However, other operators may gain at Sprint’s expense.
Roseboro said that the recession will mostly accelerate trends already underway. “Mobile will still be bigger than broadband; PSTN will continue to decline. It’s just the rate of change that may change,” she said.
While growth may continue, it will be unsteady. And for this reason, Tonia Graham, TM Forum business benchmarking program manager, said service providers can be neither too cautious nor too aggressive with large transformation projects. Instead, they must seize the opportunity to shift strategies in small ways that can provide short-term revenue increases and avoid getting buried under the weight of large investments for complex projects.
The Forum laid out its strategy in a new report called “Winning in a Shrinking World: Points to Consider.” It outlined five major points for re-evaluated plans for the next few years that pertain to collaboration, going mobile, revenue assurance, execution and reducing complexity.
