Telecoms and Software News

Have mobile operators beaten the recession?

Emeka Obiodu

Have mobile operators beaten the recession?

Ovum's research shows that it is not the recession but competition and regulation that remain the biggest dangers facing the telecoms industry. However, while the threat of a calamitous short-term impact is now remote, the recession will eventually lead to a long-term rethink of the strategic agenda of the mobile industry.

Mobile operators are beating the recession

In our recently published report Mobile operators in a recession: lessons and coping strategies, we tracked the performance indicators for mobile operators across the world in 2008. What we found was a resilient industry that is facing its problems with confidence. Even now that first-quarter results are coming in, the industry's resilience is holding firm. Results from the likes of Verizon Wireless and TeliaSonera confirm that mobile operators might have evaded the threatened cataclysm.

Recession poses three key risks for mobile operators

In the report, we project the three main recessionary forces at play:

fewer revenue-generating customers
less revenue per customer
lower value of generated revenues (from currency fluctuations).

While each of these can potentially undermine the mobile operator's business, currency fluctuation is the most dangerous as there is little that operators can do about it. Frustratingly, no matter how well an operator performs locally, if the value of its local currency falls compared to the US dollar or euro then the operator suffers. Keeping repayments on dollar- or euro-denominated loans becomes more costly and funding new network rollouts becomes very expensive.

Other problems also rear their head. There is evidence that revenue per customer is falling, as shown by the slowing revenue growth rates of most operators. For this, the causes are numerous - fewer business travellers, unemployment, fall in remittances, decline in tourism, worsening consumer confidence, falling commodity prices and an exodus of migrant workers. Based on the lessons from operators, our report contains detailed analysis of the coping strategies that would help ameliorate these impacts.

Refreshingly, our research did not show up any systemic decline in the number of revenue-generating customers. Even in markets where migrant workers are leaving, customer numbers are still rising.

Competition and regulation remain the biggest dangers

Except for currency-related impacts, it is hard for any mobile operator to justifiably solely blame the recession for its woes. Indeed, each time an operator claims that the recession has hit it, a deeper insight shows that it has simply been beaten by its rivals. For example, Verizon Wireless's convincing 1Q09 results rebut Deutsche Telekom's recent warning that the recession is hitting T-Mobile USA.

Eventually the recession will alter the strategic agenda of the industry

Although mobile operators have managed to limit their short-term exposure to the economic downturn, the recession will ultimately engineer a paradigm shift in strategic thinking across the industry. On the ground, the basics of the industry will surely remain the same, but the approach to service delivery will eventually change.

Advising on the commercial impact of technology and market changes in telecoms, software and IT services

Mobile operators are beating the recession

Recession poses three key risks for mobile operators

Competition and regulation remain the biggest dangers

Eventually the recession will alter the strategic agenda of the industry

Advising on the commercial impact of technology and
market changes in telecoms, software and IT services