Telecom Companies

Telecom companies are broadly divided into ‘Fixed-line service providers’ and ‘Wireless Service Providers’.

Fixed-line service operators

The global fixed-line telecom market registered a good performance by year ending 2004, even though none of the major telecom companies reached double digits in terms of net margin. Verizon and BT Group reported the highest net margins of 9.04 percent and 8.84 percent respectively. At the other end of the spectrum was MCI with a negative net margin of (0.64 percent).

Communications companies are experiencing a decline in their revenues from fixed-line services due to a shifting consumer preference towards mobile services and other broadband- related services. With increasing broadband penetration and high-speed data access across the various regions, the demand for fixed-line is coming down still further. This means that the players are no longer simply fixed-line operators; they are also expanding their presence in other services, in order to sustain their market share.

Mobile service operators

The global wireless market registered a better performance by the end of 2004. The net margin of some companies reached double figures but Vodafone stands out with a negative net margin of (19.02) percent. China Mobile Hong Kong and NTT DoCoMoreported the highest net margins of 21.79 percent and 20.77 percent respectively.

The overall mobile services market stood at USD414 billion at the end of 2003. The top 10 players accounted for almost 62 percent of the market. Further concentration is inevitable considering the ongoing consolidation activity. In a quest to provide more value-added services, to increase their market share and to take advantage of the liberalization of various markets around the world, there has been an increase in consolidation activity during the last decade. Vodafone is the top player in the mobile services segment with a six-month revenue of USD32,393 million (April to September, 2004) compared to NTT DoCoMo’s USD35,094 million in revenue for the nine months ending December 2004 (see table 21 above).

The operators are seeing a surge in mobile and data services. The switch from analog to digital networks has been the main reason for rapid growth in the wireless communications industry because the digital networks have the capacity to provide greater traffic volumes, lower prices and a higher quality of voice, data and Internet services.

One of the key challenges that the mobile operators are facing today is the falling ARPU due to the competitive tariff structure and an increase in the pre-paid service usage. Under these circumstances, mobile operators need to reassess the way they conduct their business.  Operators will need to find new ways of charging users for content-based services. The ability to deliver high-speed Internet access and services over high-bandwidth infrastructure (broadband) has become critical for the growth of telephone and cable operators across the world. Keeping up with the trend, the major players in the telecom industry are gradually shifting their focus from providing voice-based services to providing data services.