IST 755 Telecom Industry Analysis
Content
An Introduction: Telecommunications Industry
The telecommunication services market, which includes fixed-network services and mobile
services, had a value of around 1.5 trillion U.S. dollars in 2015, and is forecast to grow to
almost 1.7 trillion U.S. dollars in size by 2019.
The biggest markets for telecom services are the Asia/Pacific region, Europe and North
America.
Mobile and wireless technologies have become more prevalent in the past 15 years. The
market is expected to continue to gain space in the telecommunication services industry,
as the number of mobile connections worldwide is predicted to reach nine billion by 2020,
about twice the amount of 2009.
The total spending on wireless data telecommunication worldwide is forecasted to reach
nearly 550 billion U.S. dollars by 2019.
Top Telecom Companies in the World
China Mobile
Country: China
Sales: $104.1 billion
Profits: $17.7 billion
Assets: $209 billion
Market value: $271.5 billion
Verizon
Country: United States
Sales: $127.1 billion
Profits: $9.6 billion
Assets: $232.7 billion
Market value: $202.5 billion
AT&T
Country: United States
Sales: $132.4 billion
Profits: $6.2 billion
Assets: $292.8 billion
Market value: $173 billion
Top Telecom companies by Revenue
Industry Demographics- World Revenues
•
This statistic shows the total amount of revenue
made worldwide through telecommunications
services from 2005 to 2014, and also includes a
forecast for 2015 through 2018.
•
In 2007, revenue from telecommunications
services came to a total of 957 billion euros.
•
The fastest-growing telecommunications services
market is the Asia-Pacific region, with an
estimated value of 373 billion Euros in 2015.
•
By 2017, the forecasted revenue from the telecom
industry is around $1312 billion.
Market Revenue in Billion USD
•
In this figure we see the major regions for our
study: The Asia-Pac region, North America and
Africa.
•
The market has also benefited from increasingly
skilled personnel and extensive investment in
development of new technologies.
•
The telecommunications market size has
increased in the past two decades, due to cheaper
and innovative technologies, such as the Internet,
which in turn created high demand and
unprecedented access to communication
channels.
Industry Demographics
•
The telecos around the world made about
$1.14rillion in 2014
•
Services offered: There are two main types of
services provided by carriers:
Wireline
Wireless services
Strategic Analysis: Porter’s Forces
Strategic Analysis: Porter’s Five Forces
Threat of New Entrants:
Power of Suppliers:
Capital Intensive Industry: The biggest
barrier to entry is access to finance. To cover
high fixed costs, serious contenders typically
require a lot of cash.
Large number of equipment
manufacturers: There are a number of
large equipment makers around. There are
enough vendors to dilute bargaining power.
Licensing: Ownership of a telecom license
can represent a huge barrier to entry. In the
U.S., for instance, fledgling telecom
operators must still apply to the Federal
Communications Commission (FCC) to
receive regulatory approval and licensing.
Limited Skilled executives: The limited
pool of talented managers and engineers,
especially those well versed in the latest
technologies, places companies in a weak
position in terms of hiring and salaries.
Operation and man power: It is important
to remember that solid operating skills and
management experience is fairly scarce,
making entry even more difficult.
Strategic Analysis: Porter’s Five Forces
Power of Buyers:
Carrier options: With increased choice of
telecom products and services, the
bargaining power of buyers is rising. Let's
face it; telephone and data services do not
vary much, regardless of which companies
are selling them. For the most part, basic
services are treated as a commodity. This
translates into customers seeking low
prices from companies that offer reliable
service.
Switching Costs: At the same time, buyer
power can vary somewhat between market
segments. While switching costs are
relatively low for residential telecom
customers, they can get higher for larger
business customers, especially those that
rely more on customized products and
services.
Availability of Substitutes:
Cable TV and Satellite operators: Products
and services from non-traditional telecom
industries pose serious substitution
threats. Cable TV and satellite operators
now compete for buyers. The cable guys,
with their own direct lines into homes, offer
broadband internet services, and satellite
links can substitute for high-speed
business networking needs.
Internet: Just as worrying for telecom
operators is the internet: it is becoming a
viable vehicle for cut-rate voice calls.
Delivered by ISPs - not telecom operators "internet telephony" could take a big bite
out of telecom companies' core voice
revenues.
Strategic Analysis: Porter’s Five Forces
Competitive Rivalry:
Cut throat competition:
The wave of industry deregulation together with the receptive capital markets of the late 1990s paved the
way for a rush of new entrants. New technology is prompting a raft of substitute services. Nearly
everybody already pays for phone services, so all competitors now must lure customers with lower prices
and more exciting services.
Low Profitability:
The competition tends to drive industry profitability down. In addition to low profits, the telecom industry
suffers from high exit barriers, mainly due to its specialized equipment. Networks and billing systems
cannot really be used for much else, and their swift obsolescence makes liquidation pretty difficult.
Strategic Analysis: Significant Challenges faced by the telecom industry globally
•
Disruptive competition is the
principal industry challenge.
•
Regulatory uncertainties continue
to unsettle the industry.
•
Customer experience management
is the top strategic priority.
•
Service levels and personalization
can unlock greater customer
centricity.
•
Network quality remains a key
point of differentiation.
•
A new interplay of people and
processes can boost agility levels.
2015 Global Telecommunications Survey Findings
• Disruptive competition is the principal industry challenge.
• Regulatory uncertainties continue to unsettle the industry.
• Customer experience management is the top strategic priority.
• Service levels and personalization can unlock greater customer centricity.
• Network quality remains a key point of differentiation.
• A new interplay of people and processes can boost agility levels.
• In-market consolidation is the leading driver of sector M&A.
• Digital services will transform the 2020 revenue mix.
• Confidence is high in TV and cloud, but IoT revenue growth potential is less
certain
Strategic Analysis: Regulatory concerns
•
Telecommunications is a heavily regulated sector and industry leaders are highly sensitive to
uncertainties that may undermine incentives to invest.
•
As mobile data traffic continues to grow in all geographies, spectrum remains very much the lifeblood of
the sector, and 78% of participants believe that spectrum release and auction frameworks will be a
leading regulatory issue over the next three years.
•
Interestingly, net neutrality led the way as the single most important regulatory concern in years to
come, cited by more than one-third of participants.
•
This reflects its contentious status in a number of geographies, from the US to India, and a number of
participants underlined the importance of a level playing field where operators and OTTs are subject to
the same rules.
Strategic Analysis: Regulatory issues that will affect the industry
•
Meanwhile, participant views on policy risks varied according to geography. For developed market
operators, data privacy and protection ranked as the leading top-three challenge (cited by 75% of
participants)
•
While spectrum release is proportionately more pronounced among emerging market operators (78% of
participants).
Strategic Analysis: Strategic Priorities for the next 3 years
•
Customer experience management is emphatically the top priority for operators, with 68% of
participants citing it as the number one strategic priority for their organizations, while 82% viewed it as
a top-three consideration over the next three years.
•
The drive to put customers front and center in everything they do is also forcing operators to focus on
agility, efficiency and network quality — all must-have differentiators in a world where customers have
an ever-widening set of relationships with telecommunications companies and a range of digital
newcomers.
•
In this light, many of the other leading answers can be seen as supporting elements on the journey
toward more intuitive, convenient and trusted relationships with customers.
Strategic Analysis: Strategic Priorities for the next 3 years
•
Customer experience management is emphatically the top priority for operators, with 68% of
participants citing it as the number one strategic priority for their organizations, while 82% viewed it as
a top-three consideration over the next three years.
•
The drive to put customers front and center in everything they do is also forcing operators to focus on
agility, efficiency and network quality — all must-have differentiators in a world where customers have
an ever-widening set of relationships with telecommunications companies and a range of digital
newcomers.
•
In this light, many of the other leading answers can be seen as supporting elements on the journey
toward more intuitive, convenient and trusted relationships with customers.
Demographics
WORLD INTERNET USAGE STATISTICS
• We can see that about 88% of the United States
has access to the internet in one form or the
other.
• This figure is much higher than developing
regions and countries in Asia and Africa which
have only about 40% and 30% penetration of
internet in the country.
• Thus we can say that the industries in these
regions will have very different strategies since
they have different priorities.
(as of NOVEMBER 30, 2015)
Internet Users
Penetration
(%
Population)
330,965,359
28.6 %
1,622,084,293
40.2 %
Europe
604,147,280
73.5 %
Middle East
123,172,132
52.2 %
North America
313,867,363
87.9 %
Latin America /
Caribbean
344,824,199
55.9 %
27,200,530
73.2 %
3,366,261,156
46.4 %
World Regions
Africa
Asia
Oceania / Australia
WORLD TOTAL
Regions
The United States
Nigeria
India
United States Telecom Industry
• Over the last few years the U.S. economic performance has exceeded expectations of many in
government and private industry. Many believe that the emerging telecommunications industry is one of
the reasons for the performance. Telecommunications has transformed American society at every level
from the household, to the shop floor, to the boardroom. Telecommunications has expanded its definition
from telephone to include broadband services, high-speed data transmission, and various wireless
technologies including cellular telephones and packet radio.
• This rapid evolution in telecommunications has been driven by the technological changes taking place in
the information technology industries in general. These geometric increases in computer processing
speed and the development and expansion of the Internet have combined to confront the traditional
regulated monopoly structure of telecommunications industry in this country
Offerings by telecom companies
Traditionally, telecom companies made money mainly by providing voice calling, text messaging, and Internet connectivity
through wireline or landline connections. It offered its services to consumers and businesses. Now, the business is driven
wireless along with wired internet, data, and business solutions
Wireless
In wireless, telecom companies primarily make money by selling subscription plans for voice and data. They also
sell equipment—like phones, notebooks, and tablets. They provide wireless hotspots across the country.
Wireline
In wireline, telecom companies sell voice and data services to customers. They offer traditional landline phones and VoIP
(Voice over Internet Protocol). For the Internet, they give solutions ranging from basic connectivity over the usual DSL
(digital subscriber line) to high-speed connections. In home entertainment, they provide television services through IPTV
(Internet Protocol television). They also sell advanced services in video conferencing, high bandwidth dedicated lines, and
secured communication setups to their large customers.
Major Telecom companies in the United States
•
Verizon Wireless is the largest mobile services provider in the US, with over 108.7 million customers.
The main factor for its success is its customer service and network reach and reliability, which has
awarded it the best J. D. Power’s Custom Satisfaction award.
•
AT&T with 103 million subscribers comes in a second place in the ranking, right after Verizon, mainly for
its customer services. It has the largest selection of available phones, its wireless network is extensive,
with the largest 4G network within the US.
•
Sprint provides calling plans that may fit customers’ needs better than the competition, with some 55
million customers, Sprint Nextel comes in last place of the top 3 ranking, mainly due to its customer
service ratings being notably lower than other carriers. It emphasizes data plans over traditional voice
plans, and has one of the best 4G networks in the US.
•
T- Mobile Mobile telephone company based in Bellevue, Washington; subsidiary of T-Mobile
International, a subsidiary of Deutsche Telekom; national provider of wireless voice, messaging and data
services
Factors that influence Telecom growth
• Competition has been driving innovation in the
telecommunications and information technology
industries at a rapid pace.
• Collectively known as the information technology
(IT) industry, it is one of the faster growing groups of
industries in the U.S.
• Growth in the industry’s contribution to GDP is
impressive, but is even more so when one
considers the change in price accompanying this
growth.
• IT prices have been dropping as the rate of change
of computing and networking power has increased,
which is an important distinction to other high growth
industry groups where price increases have followed
growth
ROE, Gross margin and Operating Margins
Number of Mobile Phone Users in the United States
Developed vs Developing Markets
•
Developed market operators are proportionately more likely to cite IT-led technical improvements that
can aid greater agility, while emerging market operators are relatively more concerned with peopleoriented improvements that can improve organizational effectiveness.
•
Many operators in mature markets have already undergone substantial changes to their organizational
structures and for some, people-related initiatives now center on new leadership roles regarding digital
activities and big data.
Gross Domestic Product (2006-2014)
In this slide we are comparing the GDP per capita for the 3 countries in consideration. The United States,
Nigeria and India in Green, Red and Blue respectively.
Percentage of unemployed people (2006-2014)
In this slide we are comparing the percentage of unemployed people out of the total labor force for the 3
countries in consideration: United States, Nigeria and India in Green, Red and Blue respectively.
Number of Internet users per 100 (2006-2014)
In this slide we are comparing the number of Internet users per 100 people for the 3 countries in
consideration. The United States, Nigeria and India in Green, Red and Blue respectively.
The telecommunication services market, which includes fixed-network services and mobile
services, had a value of around 1.5 trillion U.S. dollars in 2015, and is forecast to grow to
almost 1.7 trillion U.S. dollars in size by 2019.
The biggest markets for telecom services are the Asia/Pacific region, Europe and North
America.
Mobile and wireless technologies have become more prevalent in the past 15 years. The
market is expected to continue to gain space in the telecommunication services industry,
as the number of mobile connections worldwide is predicted to reach nine billion by 2020,
about twice the amount of 2009.
The total spending on wireless data telecommunication worldwide is forecasted to reach
nearly 550 billion U.S. dollars by 2019.
Top Telecom Companies in the World
China Mobile
Country: China
Sales: $104.1 billion
Profits: $17.7 billion
Assets: $209 billion
Market value: $271.5 billion
Verizon
Country: United States
Sales: $127.1 billion
Profits: $9.6 billion
Assets: $232.7 billion
Market value: $202.5 billion
AT&T
Country: United States
Sales: $132.4 billion
Profits: $6.2 billion
Assets: $292.8 billion
Market value: $173 billion
Top Telecom companies by Revenue
Industry Demographics- World Revenues
•
This statistic shows the total amount of revenue
made worldwide through telecommunications
services from 2005 to 2014, and also includes a
forecast for 2015 through 2018.
•
In 2007, revenue from telecommunications
services came to a total of 957 billion euros.
•
The fastest-growing telecommunications services
market is the Asia-Pacific region, with an
estimated value of 373 billion Euros in 2015.
•
By 2017, the forecasted revenue from the telecom
industry is around $1312 billion.
Market Revenue in Billion USD
•
In this figure we see the major regions for our
study: The Asia-Pac region, North America and
Africa.
•
The market has also benefited from increasingly
skilled personnel and extensive investment in
development of new technologies.
•
The telecommunications market size has
increased in the past two decades, due to cheaper
and innovative technologies, such as the Internet,
which in turn created high demand and
unprecedented access to communication
channels.
Industry Demographics
•
The telecos around the world made about
$1.14rillion in 2014
•
Services offered: There are two main types of
services provided by carriers:
Wireline
Wireless services
Strategic Analysis: Porter’s Forces
Strategic Analysis: Porter’s Five Forces
Threat of New Entrants:
Power of Suppliers:
Capital Intensive Industry: The biggest
barrier to entry is access to finance. To cover
high fixed costs, serious contenders typically
require a lot of cash.
Large number of equipment
manufacturers: There are a number of
large equipment makers around. There are
enough vendors to dilute bargaining power.
Licensing: Ownership of a telecom license
can represent a huge barrier to entry. In the
U.S., for instance, fledgling telecom
operators must still apply to the Federal
Communications Commission (FCC) to
receive regulatory approval and licensing.
Limited Skilled executives: The limited
pool of talented managers and engineers,
especially those well versed in the latest
technologies, places companies in a weak
position in terms of hiring and salaries.
Operation and man power: It is important
to remember that solid operating skills and
management experience is fairly scarce,
making entry even more difficult.
Strategic Analysis: Porter’s Five Forces
Power of Buyers:
Carrier options: With increased choice of
telecom products and services, the
bargaining power of buyers is rising. Let's
face it; telephone and data services do not
vary much, regardless of which companies
are selling them. For the most part, basic
services are treated as a commodity. This
translates into customers seeking low
prices from companies that offer reliable
service.
Switching Costs: At the same time, buyer
power can vary somewhat between market
segments. While switching costs are
relatively low for residential telecom
customers, they can get higher for larger
business customers, especially those that
rely more on customized products and
services.
Availability of Substitutes:
Cable TV and Satellite operators: Products
and services from non-traditional telecom
industries pose serious substitution
threats. Cable TV and satellite operators
now compete for buyers. The cable guys,
with their own direct lines into homes, offer
broadband internet services, and satellite
links can substitute for high-speed
business networking needs.
Internet: Just as worrying for telecom
operators is the internet: it is becoming a
viable vehicle for cut-rate voice calls.
Delivered by ISPs - not telecom operators "internet telephony" could take a big bite
out of telecom companies' core voice
revenues.
Strategic Analysis: Porter’s Five Forces
Competitive Rivalry:
Cut throat competition:
The wave of industry deregulation together with the receptive capital markets of the late 1990s paved the
way for a rush of new entrants. New technology is prompting a raft of substitute services. Nearly
everybody already pays for phone services, so all competitors now must lure customers with lower prices
and more exciting services.
Low Profitability:
The competition tends to drive industry profitability down. In addition to low profits, the telecom industry
suffers from high exit barriers, mainly due to its specialized equipment. Networks and billing systems
cannot really be used for much else, and their swift obsolescence makes liquidation pretty difficult.
Strategic Analysis: Significant Challenges faced by the telecom industry globally
•
Disruptive competition is the
principal industry challenge.
•
Regulatory uncertainties continue
to unsettle the industry.
•
Customer experience management
is the top strategic priority.
•
Service levels and personalization
can unlock greater customer
centricity.
•
Network quality remains a key
point of differentiation.
•
A new interplay of people and
processes can boost agility levels.
2015 Global Telecommunications Survey Findings
• Disruptive competition is the principal industry challenge.
• Regulatory uncertainties continue to unsettle the industry.
• Customer experience management is the top strategic priority.
• Service levels and personalization can unlock greater customer centricity.
• Network quality remains a key point of differentiation.
• A new interplay of people and processes can boost agility levels.
• In-market consolidation is the leading driver of sector M&A.
• Digital services will transform the 2020 revenue mix.
• Confidence is high in TV and cloud, but IoT revenue growth potential is less
certain
Strategic Analysis: Regulatory concerns
•
Telecommunications is a heavily regulated sector and industry leaders are highly sensitive to
uncertainties that may undermine incentives to invest.
•
As mobile data traffic continues to grow in all geographies, spectrum remains very much the lifeblood of
the sector, and 78% of participants believe that spectrum release and auction frameworks will be a
leading regulatory issue over the next three years.
•
Interestingly, net neutrality led the way as the single most important regulatory concern in years to
come, cited by more than one-third of participants.
•
This reflects its contentious status in a number of geographies, from the US to India, and a number of
participants underlined the importance of a level playing field where operators and OTTs are subject to
the same rules.
Strategic Analysis: Regulatory issues that will affect the industry
•
Meanwhile, participant views on policy risks varied according to geography. For developed market
operators, data privacy and protection ranked as the leading top-three challenge (cited by 75% of
participants)
•
While spectrum release is proportionately more pronounced among emerging market operators (78% of
participants).
Strategic Analysis: Strategic Priorities for the next 3 years
•
Customer experience management is emphatically the top priority for operators, with 68% of
participants citing it as the number one strategic priority for their organizations, while 82% viewed it as
a top-three consideration over the next three years.
•
The drive to put customers front and center in everything they do is also forcing operators to focus on
agility, efficiency and network quality — all must-have differentiators in a world where customers have
an ever-widening set of relationships with telecommunications companies and a range of digital
newcomers.
•
In this light, many of the other leading answers can be seen as supporting elements on the journey
toward more intuitive, convenient and trusted relationships with customers.
Strategic Analysis: Strategic Priorities for the next 3 years
•
Customer experience management is emphatically the top priority for operators, with 68% of
participants citing it as the number one strategic priority for their organizations, while 82% viewed it as
a top-three consideration over the next three years.
•
The drive to put customers front and center in everything they do is also forcing operators to focus on
agility, efficiency and network quality — all must-have differentiators in a world where customers have
an ever-widening set of relationships with telecommunications companies and a range of digital
newcomers.
•
In this light, many of the other leading answers can be seen as supporting elements on the journey
toward more intuitive, convenient and trusted relationships with customers.
Demographics
WORLD INTERNET USAGE STATISTICS
• We can see that about 88% of the United States
has access to the internet in one form or the
other.
• This figure is much higher than developing
regions and countries in Asia and Africa which
have only about 40% and 30% penetration of
internet in the country.
• Thus we can say that the industries in these
regions will have very different strategies since
they have different priorities.
(as of NOVEMBER 30, 2015)
Internet Users
Penetration
(%
Population)
330,965,359
28.6 %
1,622,084,293
40.2 %
Europe
604,147,280
73.5 %
Middle East
123,172,132
52.2 %
North America
313,867,363
87.9 %
Latin America /
Caribbean
344,824,199
55.9 %
27,200,530
73.2 %
3,366,261,156
46.4 %
World Regions
Africa
Asia
Oceania / Australia
WORLD TOTAL
Regions
The United States
Nigeria
India
United States Telecom Industry
• Over the last few years the U.S. economic performance has exceeded expectations of many in
government and private industry. Many believe that the emerging telecommunications industry is one of
the reasons for the performance. Telecommunications has transformed American society at every level
from the household, to the shop floor, to the boardroom. Telecommunications has expanded its definition
from telephone to include broadband services, high-speed data transmission, and various wireless
technologies including cellular telephones and packet radio.
• This rapid evolution in telecommunications has been driven by the technological changes taking place in
the information technology industries in general. These geometric increases in computer processing
speed and the development and expansion of the Internet have combined to confront the traditional
regulated monopoly structure of telecommunications industry in this country
Offerings by telecom companies
Traditionally, telecom companies made money mainly by providing voice calling, text messaging, and Internet connectivity
through wireline or landline connections. It offered its services to consumers and businesses. Now, the business is driven
wireless along with wired internet, data, and business solutions
Wireless
In wireless, telecom companies primarily make money by selling subscription plans for voice and data. They also
sell equipment—like phones, notebooks, and tablets. They provide wireless hotspots across the country.
Wireline
In wireline, telecom companies sell voice and data services to customers. They offer traditional landline phones and VoIP
(Voice over Internet Protocol). For the Internet, they give solutions ranging from basic connectivity over the usual DSL
(digital subscriber line) to high-speed connections. In home entertainment, they provide television services through IPTV
(Internet Protocol television). They also sell advanced services in video conferencing, high bandwidth dedicated lines, and
secured communication setups to their large customers.
Major Telecom companies in the United States
•
Verizon Wireless is the largest mobile services provider in the US, with over 108.7 million customers.
The main factor for its success is its customer service and network reach and reliability, which has
awarded it the best J. D. Power’s Custom Satisfaction award.
•
AT&T with 103 million subscribers comes in a second place in the ranking, right after Verizon, mainly for
its customer services. It has the largest selection of available phones, its wireless network is extensive,
with the largest 4G network within the US.
•
Sprint provides calling plans that may fit customers’ needs better than the competition, with some 55
million customers, Sprint Nextel comes in last place of the top 3 ranking, mainly due to its customer
service ratings being notably lower than other carriers. It emphasizes data plans over traditional voice
plans, and has one of the best 4G networks in the US.
•
T- Mobile Mobile telephone company based in Bellevue, Washington; subsidiary of T-Mobile
International, a subsidiary of Deutsche Telekom; national provider of wireless voice, messaging and data
services
Factors that influence Telecom growth
• Competition has been driving innovation in the
telecommunications and information technology
industries at a rapid pace.
• Collectively known as the information technology
(IT) industry, it is one of the faster growing groups of
industries in the U.S.
• Growth in the industry’s contribution to GDP is
impressive, but is even more so when one
considers the change in price accompanying this
growth.
• IT prices have been dropping as the rate of change
of computing and networking power has increased,
which is an important distinction to other high growth
industry groups where price increases have followed
growth
ROE, Gross margin and Operating Margins
Number of Mobile Phone Users in the United States
Developed vs Developing Markets
•
Developed market operators are proportionately more likely to cite IT-led technical improvements that
can aid greater agility, while emerging market operators are relatively more concerned with peopleoriented improvements that can improve organizational effectiveness.
•
Many operators in mature markets have already undergone substantial changes to their organizational
structures and for some, people-related initiatives now center on new leadership roles regarding digital
activities and big data.
Gross Domestic Product (2006-2014)
In this slide we are comparing the GDP per capita for the 3 countries in consideration. The United States,
Nigeria and India in Green, Red and Blue respectively.
Percentage of unemployed people (2006-2014)
In this slide we are comparing the percentage of unemployed people out of the total labor force for the 3
countries in consideration: United States, Nigeria and India in Green, Red and Blue respectively.
Number of Internet users per 100 (2006-2014)
In this slide we are comparing the number of Internet users per 100 people for the 3 countries in
consideration. The United States, Nigeria and India in Green, Red and Blue respectively.
