2012 Telecommunications Industry Perspective

2012 Telecommunications Industry Preview
Article Link By Karim Sabbagh

This is the time to look back at how the global telecommunications industry fared in 2011, the major trends that will affect it in 2012, and the strategies and capabilities operators will need in order to benefit from these trends.

In 2011, the telecom industry has finally managed to come to terms with two major global shocks that have threatened it lately. The first, of course, was the global economic downturn that continues to adversely affect the performance of operators in markets around the world. Growth naturally slowed, abetted by constrained credit markets, and thus accelerated the commoditization of traditional telecom services, while reducing the valuations of operators large and small. As a result, operators focused on cutting costs and increasing operational efficiency to protect profitability. The increase in caution has also led to a significant slowdown in mergers and acquisitions

The second shock has been the disruption caused by mass digitization. Customers — both consumers and businesses — are becoming more demanding, expecting always-on service everywhere, and forcing operators to boost network capacity and connectivity. All manner of industries are also becoming increasingly digitized and demanding a variety of new services like mobile payment platforms and cloud computing. The market for mobile applications continues to grow rapidly, creating yet another disruptive force that operators must learn to benefit from.

At the same time, the integrated technology value chains on which operators have long depended, including critical applications and service platforms, are growing increasingly modular and open. As a result, the telecom ecosystem is becoming much more competitive, as new entrants from adjacent industries look to exploit both new customer expectations and technological openness..

Yet despite — or perhaps because of — all these challenges, much of the telecom industry has finally reached a consensus on how to move forward to transform itself. That transformation will take the form of a fundamental shift among operators from the integrated business models that dominated the industry for most of the past century to four distinct, though by no means mutually exclusive, open business models designed to take full advantage of the opportunities now opening up: the reliable, cost-efficient network guarantor; the flexible, integrated business enabler; the innovative, customer-facing experience creator; and the wide-ranging, synergistic global multimarketer. (For further details on the models, see “The Future of Telecom Operators: Capabilities for Rapid Change” by Bahjat El-Darwiche, Roman Friedrich, Pierre Péladeau, and Karim Sabbagh, Booz & Company, 2010). The effort to create and perfect these models will also require an ongoing process of cost restructuring to align costs more tightly with business goals.
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