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Telco challenges as fixed voice shrinks

Carol Ko | Sept. 22, 2008
The Asia Pacific is set to surpass North America as the largest regional telecom market.

HONG KONG, 22 SEPTEMBER 2008 The worldwide telecommunications market is on track to reach US$2 trillion in 2008, a 7.6 per cent increase from its 2007 revenue of US$1.8 trillion, According to the research house Gartner.

Gartner says the telecommunications industry faces challenges as growth in the fixed voice sector, and in the most developed countries, has slowed, or even begun to shrink.

Data services win

Revenue from telecom services has traditionally dominated the market, accounting for four out of every five dollars earned in the sector, said Will Hahn, principal research analyst at Gartner. We forecast that this proportion will now shrink, an indication that legacy revenue is no longer sufficient for carriers to justify their investments. The telecoms equipment sector will return to a period of relative growth, thanks in part to the growing importance of emerging countries, mobile devices and equipment that must be deployed to support new and converged services.

Revenue in the telecom service segment is expected to reach US$1.6 trillion in 2008 and account for 81 per cent of overall telecom revenue. In 2007, total telecom service revenue was US$1.49 trillion, four times higher than total telecom equipment revenue at US$353 billion.

Gartner forecasts that by 2012, the service segment will have a compound annual growth rate (CAGR) of 4.4 percent, compared with 8.7 per cent for the equipment segment. As a result, the relative proportions of the two segments will finally begin to move downward, closer to 3-to-1.

Gartner predicts that by 2012, the ratio of mobile to fixed connections will exceed 4-to-1. We now forecast that revenue in the mobile sector will top US$1 trillion by 2010, said Hahn. Our breakdown of services clearly shows that fixed voice is in decline, but mobile voice, though currently growing, will also stagnate as a proportion of the market by 2012. The baton has clearly been passed to data services in the legacy sector.

AP surpassing North America

From a regional perspective, North America has been the largest telecommunications market, but Asia Pacific is forecast to surpass North America in telecom revenue in 2008. North American telecom revenue is forecast to total US$511.6 billion in 2008, a 4.5 per cent increase from 2007. The telecom market in Asia Pacific is projected to reach US$513.1 billion in 2008, up 8 per cent from 2007. Meanwhile, the Middle East and Africa will be the fastest-growing region with a CAGR of 8.6 per cent between 2007 and 2012.

Traditional telecom service providers and equipment manufacturers are seeing convergent trends eroding their margins while rising Asian players and other entrants eat away at their share within the total market, said Hahn.


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