Carriers in trouble

A Gartner report issued in November says over the next few years, carriers will invest in new markets, such as media, to compensate for revenue lost in traditional telecommunications services like public switched telephone network voice.

Says the report: "Many [tier-one operators] will fail because they don't understand the media and entertainment business, or because they have inflated expectations of revenues and profits."

It goes on to say "operators will also seek to offset declining revenue from traditional services by offering integrated IT and communications services to enterprises. To do this, they will have to acquire international systems integration firms". A local example of this is Telkom's attempt to buy Business Connexion.

"These new ventures," says Gartner, "will need substantial investment in technology. To enable Internet Protocol (IP) services, carriers will spend billions of dollars on IP Multimedia Subsystem equipment over the next few years in the hope that it will enable innovation."

Gartner sees IMS as a way toward network optimisation, and not as an engine for innovation. "Some mobile network operators are thinking about investing in WiMax technology. Sprint Nextel's decision to launch WiMax services has generated much hype in the industry, although many operators will stick to the existing roadmap for third-generation networks, instead of buying into an immature technology."

The report's key findings include the following:

* Growth of the entire telecoms service revenue (which accounts for 80% of the total market size) will drop to 1.7% in 2010. Historically, carriers have been able to depend on high revenue growth from broadband or mobile services, but they now face the prospect of rapidly declining revenue growth. As a result, carriers are looking into similar markets, such as IT or media/content, to compensate for their losses and potentially increase network access sales.

The major network service providers are courting new revenue opportunities as they face declining traditional voice revenues and limited data services growth. One such growth opportunity is the convergence of IT services and telecoms. Gartner expects mega-mergers in this area from 2008 as major carriers like AT&T, BT and Verizon acquire large IT providers of the scale of Capgemini, EDS and HP.

* By 2011, fewer than 10 international mobile operators will deploy today's WiMax standard as their primary wireless broadband strategy. The majority of cellular networks and subscribers are GSM and UMTS, so there is already a large investment in technologies to support these over the next five to seven years. The result is that many operators are unlikely to choose WiMax for their next-generation technology.

Source: Gartner Africa - Predicts 2007: Carriers Will Spend Billions to Try to Survive IP Revolution.