Telecommunications is the largest sector in the technology industry – the sector generated $2.1 trillion in revenues in 2010, representing over 40% of the $4.8 trillion tech industry. The soft global economy has driven greater pricing pressure, a trend that started in 2008 and continues to plague the industry. Consumer pricing expectations, along with weak subscriber growth in developed nations, will make it difficult for carriers to regain pricing strength in an improved economy. As a result, most companies will continue to experience margin pressure, which will be exacerbated should the major economies experience a double-dip recession. Traditional wire line telecom providers will continue to migrate their focus to broadband services in mature markets. This shift in focus has increased the level of capital expenditures both at the head end and in support services. Further, infrastructure companies that support the carriers will continue to strive to deliver new, innovative products while facing relentless pressure to drive down cost and selling to customers with increasingly strained balance sheets.
Despite the general industry performance, the top 20 Global Carriers, which make up 65% of total capital spend, have seen a smaller contraction in both margins and capital spending than the market. Greater product diversity has driven margins and demand for services in the mobile sector, which has driven demand for capital spending.
Going forward low cost providers that can combine a broad portfolio of product and service offerings will define the long-term industry leaders. The increasing convergence between telecommunications, media and technology companies will continue to drive consolidation, with value driven by those companies able to most effectively harness operational efficiencies.
AlixPartners—For when it really matters
At AlixPartners, our seasoned professionals have worked with a wide range of telecommunications, media, and technology companies on successfully meeting a variety of difficult challenges around the world. We have the capability, experience, and judgment to work with the most complex situations— bringing together a practical understanding of strategic challenges, deep senior management expertise, an overriding sense of urgency, and a bias for action that can make the defining difference in a dynamic industry that requires constant change. Our telecommunications professionals can help your business navigate the road ahead in an array of areas including:
- Operational improvement and cost reduction
- Merger integration
- Interim management
- Business plan and operating plan development
- Working capital and cash flow management