Survival of the fittest: a mixed performance by the world’s largest telcos

Some of the world’s largest service providers have beaten the recession blues and out-performed overall market growth, either by being focused on high growth markets or by merger and acquisition activities. China Mobile, Vodafone and America Movil fit into the first camp while China Unicom, Vivendi, China Telecom and Verizon are in the latter. All of these companies reported Q1 2009 revenues that were at least 10% higher than their respective Q1 2008 turnover. In aggregate, the seven recorded 16% revenue growth in the latest quarter (when measured in their local currencies).

But what about the other end of the scale? Which of the top 20 service providers saw their revenues shrink the most? Nine of the world’s top 20 telcos saw revenues decline in Q1 2009 relative to the same quarter last year, while a tenth managed to nudge its revenues over the ‘flat line’. In aggregate, these ten saw their quarterly revenues decline by 4% year-on-year (again, when measured in their local currencies). Sprint Nextel suffered the most, with a 12% fall in sales, followed by KDDI (-9%) and Telecom Italia (-7%). Eight of these ten share a common characteristic: businesses that are very heavily focused on a single geographic market which are growing only slowly and which are highly competitive.

According to John Dinsdale, executive director at TeleGeography, ‘Leading service providers should be setting the bar at a minimum 5% growth per year if they are intent on improving their standing in the market’. Based on recent research by TeleGeography’s GlobalComms Insight, growth in the global telecoms market is currently running at 5% per annum and will drop off to just 3% over the next three years. ‘While revenue growth is not the only criteria in judging the success of these companies, it is a very important one’ added Dinsdale. ‘Declining market shares will be viewed dimly by investors and shareholders. As the service provider market continues to consolidate, it is the companies that fall behind that will become the target for takeovers. Only the fittest will survive’.