Telecom Industry

The spectacular telecom industry bust in 2000 continued to haunt telecom companies, regulators and investors in 2004. Telecom companies attempted to start over by replacing top executives, restructuring debt and scaling down business plans, but now admit that undoing excesses of the past may take longer than expected.

Telecom companies had taken on massive debt to build telecom networks and bag third generation licenses, but less than anticipated demand resulted in debt servicing problems. Some companies, like Global Crossing, declared bankruptcy while others underwent painful financial restructuring. Credibility also took a beating with the discovery of accounting irregularities at WorldCom, which used accounting ploys to inflate profits by a shocking USD11 billion. Debt write offs and financial restructuring in past few years have helped the global communications industry get into slightly better shape, but regaining lost credibility will be far more difficult.

Telecom industry status and current market size

The telecom industry as we know it today, will not exist tomorrow. Changes are happening so rapidly that it is almost impossible to predict how the telecom industry will look in the future. The last decade has seen the industry come alive with, at first, a few small progressive steps, followed by a giant leap. This is just the beginning; the best is yet to come.

In 2003, the global telecoms market revenue was USD1.4 trillion, up nearly 7 percent from 2002. Telecoms services accounted for 78 percent of the total revenues standing at USD1.09 trillion. Industry revenue continued to rise in 2004 to an estimated USD1.5 trillion, up 7.1 percent. Equipment revenue has remained within the of 20 to 24 percent range throughout the last decade. The US has continued to dominate the market into 2004, accounting for 36 percent of total revenue.

Although competition is intense in the telecom industry, a few large players dominate the market. In fixed-line services, the top 10 communications companies account for around 54 percent of the market. In mobile communication services, the top 10 players account for almost 62 percent of the market.

In the last decade, the telecom industry has experienced significant growth, but there has also been consolidation as a result of deregulation and liberalization, technological change and other global market forces. Cross-border mergers and acquisitions have increased as more and more telecoms operators realize that meeting customers’ needs, while still making a profit, is difficult without a global network. The 2001 meltdown in the technology sector did dampen spirits, but more recently things have improved and M&As are back in favour.

The telecom industry is all set to grow but the competition will be intense, consumers demanding, and technologies progressively more complex. At the end of the day, however, what separates winners from losers is customer orientation. This is an industry where a company could easily focus too much on the technology and consequently lose touch with its current customers, never mind future ones.
 
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