Given the telco industry’s slowdown over the past 3 years, operators are facing a challenge: value is shifting toward software and IT solutions providers. This requires operators to build new economic models based on market consolidation, optimization of pricing models, deployment of advanced technologies, and diversification into adjacent markets. The entire industry is at a turning point.

1. The telecom industry
at a turning point
by Pierre Péladeau, Mohssen Toumi
and Steven Pattheeuws
Read more on
www.booz.com

2. The telecom industry
at a turning point
Overall telco growth
slowed to 1.5% in 2013.
Operators’ growth was only 0.3%.
This decrease is mainly driven by:
• the development of low cost/online brands,
• a price war between operators,
• market commoditization due to a larger share of online
sales (50% in France) and new regulatory requirements
(termination rate, roaming revenues).

3. The value shifted toward
software, IT, and content players
TMT REVENUES BY MARKET SEGMENT
2010 - 2013, in billions of dollars
CAGR
12-13
-3.4%
4.7%
1.9%
0.3%
11.7%
6.3%
404386342331
915924
796
The telecom industry
at a turning point

4. The telecom slowdown was
global but unequal. Over the
past 3 years, Europe (-2.3%)
and France (-4.2%)
were disproportionately hit.
The telecom industry
at a turning point

5. Telco is moving from a ―connecting
people‖ to a ―connecting devices‖
business.
By 2020, the number of connected
devices will reach 50 billion—
7 times the world’s population.
The telecom industry
at a turning point

6. The share of value is skewed toward
service players.
By 2020, 80% of total revenue
opportunity will go to information
services providers, leading to the rise of
integrated players providing hardware,
software, and information services.
The telecom industry
at a turning point

7. Handset manufacturers are
strengthening relationships with software
providers that now account for 45% of
smartphone revenue.
The smartphone manufacturers
controlling 96% of the smartphone
market have chosen an OS from one of
these software companies.
The telecom industry
at a turning point

8. New users are driving fast LTE adoption
and growth.
In France, the number of users grew
from 1.6 to 3 million between the third
and fourth quarters of 2013.
From 2012 to 2013, the number of LTE
users worldwide grew from 75 to 182
million.
The telecom industry
at a turning point

9. As operators pay for
LTE deployment, they need to
build new economic
models to monetize network cost.
The telecom industry
at a turning point

10. Options are:
• Reduction of costs through
“network sharing” (5–50% savings)
• Development of advanced
technologies with lower cost per Mb
(3–4 times more cost-effective)
• Optimization of pricing models
The telecom industry
at a turning point

11. Telecom is at a
turning point.
We see three potential
scenarios ahead…
The telecom industry
at a turning point

12. The telecom industry
at a turning point
Internet/OTT Rule
• Commoditization of access:
technology, regulation, SoftSIMs,
and OTT players squeeze operators
• Dominant OTT/ICT bundle
and resell connectivity
• Connectivity CAGR: -5%
1

13. The telecom industry
at a turning point
Unbundled Cooperation
• Customers value ubiquitous,
seamless, reliable access
• Stable value distribution between
connectivity and OTT (~80/20)
• Connectivity CAGR: -2%
2

14. Telco Digital Paradise
• Explosion of connected devices
• Customers purchase access-
based solutions
• Operators innovate and own
apps portfolio; OTTs confined
to the long tail
• Connectivity CAGR: +3%
• Add-on apps value
3
The telecom industry
at a turning point
download the infographic >