Mobile operators are better placed than their fixed-line counterparts to weather the economic storm that is engulfing the planet. This is because they have greater flexibility in their cost structures and capital expenditure programmes, and because of ongoing substitution from fixed to mobile phones.<\/p>\n
That is one of the key findings of a new research report, Confronting the Crisis: Its Impact on the ICT Industry, published this month by the International Telecommunication Union (ITU).<\/p>\n
Mobile operators in emerging markets are also better placed than their rivals in advanced economies. The report quotes MTN CEO Phuthuma Nhleko as saying the African telecom market may not be too adversely affected by the crisis. MTN said last week it expected headline earnings per share for the year to end December to rise by about 40% (see page 77), a remarkable achievement given market conditions. MTN reports its results on March 12.<\/p>\n
Not everyone\u2019s doing as well as MTN, though. The picture \u201cvaries considerably by country and company\u201d, the ITU report says. \u201cAny prediction as to how the crisis will affect future investment plans is fraught with uncertainty.\u201d<\/p>\n
Nevertheless, operators and equipment manufacturers remain bullish about growth prospects, especially in emerging markets. Last week in Barcelona, at the annual Mobile World Congress telecom confab, senior industry executives spoke bullishly about connecting the 2,7bn people worldwide who do not yet use a mobile phone. Mobile subscriptions topped 4bn for the first time in December 2008, meaning that about three in five people now have a cellphone.<\/p>\n
According to the ITU report, there is continued strong demand for mobile services. Growth continues unabated in the largest developing mobile markets, it says. The world\u2019s biggest operator, China Mobile, added 74m subscribers in the 12 months to October 2008. In India, which surpassed the US last year to become the world\u2019s second-largest mobile market after China, 10,4m new subscribers were added in October 2008 alone.<\/p>\n
There\u2019s also growing demand for wireless broadband in emerging markets, primarily driven by 3G cellular networks, and, to a lesser extent, by WiMax, a rival technology. Long-Term Evolution, the successor to 3G \u2014 LTE offers ultra high-speed wireless broadband \u2014 is also expected to gain traction, first in developed markets.<\/p>\n
US operator Verizon Wireless has committed to rolling out LTE this year, though many operators have put off their plans until 2011 or 2012.<\/p>\n
Fixed-line operators are expected to have a tougher time as a result of the financial crisis than their mobile cousins. The ITU report says the crisis is threatening to derail these operators\u2019 investments in \u201cnext-generation networks\u201d. Fixed-line operators have to reinvent their networks, designing them for high speed data instead of voice, if they\u2019re to survive.<\/p>\n
The report says there is growing pressure on governments to help finance some of the next-generation networks being built or planned.<\/p>\n
In SA, Telkom has spent tens of billions of rand in recent years on replacing its legacy infrastructure. It is also recasting itself as a fixed-wireless and mobile operator as it seeks to fend off growing competitive threats in its home market.<\/p>\n
But IDC analyst Chris Lewis says in the ITU report that traditional fixed-line carriers could eventually find themselves \u201ctotally disintermediated and left with just the basic connection\u201d. It\u2019s what Lewis calls the \u201ccalamity scenario\u201d.<\/p>\n
More likely is that they\u2019ll expand into value-added services that leverage their core businesses \u2014 by providing media services such as pay-TV, IT solutions for business, and data centre facilities for cloud computing where software is delivered as a service over the Internet.<\/p>\n
The ITU report says ultimately the financial crisis may present challenges for some telecom companies. But in an industry known for innovation and technological change, it will also revitalise the sector and allow new entrants with new technologies to thrive.<\/p>\n