Telecom Lead Asia: Network managed services market growth is set to slow down in the next five years.
ABI Research says the network managed services market will grow at a CAGR of 7 percent between 2012 to 2018 against previous years’ double-digit growth.
Telecom equipment vendors — which are active in the network managed services market — such as Ericsson, Nokia Siemens Networks and Alcatel-Lucent will feel the heat.
Sluggish operator capex outlook, disconnect between internal tools and scaling of network operations, commoditization of the low-end managed services and concerns of profitability are triggering the slow growth.
Operators face business pressure
Big European operators are facing the business pressure due to uncertain conditions. For instance, Moody’s rates France Telecom’s debt A3, the fourth-lowest investment grade.
Moody’s says France Telecom risks a cut to its debt rating if it doesn’t do more to trim costs and save cash in the coming year. Pressure from competition, the sluggish economy and regulators will intensify and weigh on the former French monopoly’s ability to preserve its financial performance.
Despite the gloomy macro-economic conditions, especially Europe, service providers have no choice but to invest in their networks now; some have been restricting capex for so many years that they are experiencing network outages, unable to handle the exploding traffic. There is demand for telecom services everywhere, particularly for mobile broadband, according to Infonetics Research.
Indian telecom operators are also feeling the pressure. Recently, Angel Broking said it expects revenue growth to be modest on the back of increase in MOU, a slight inch up in VAS share and flat voice ARPM in Q3 FY 2013.
Infrastructure Capex to face cut
Though NTT, China Mobile and AT&T will be spending heavily on telecom Capex in 2013, several other operators are curbing investment in wireless and wireline infrastructure.
While incumbent carrier capex on the whole is flat to slightly down this year, independent wireless operators, competitive operators, and cable operators are increasing capex, led by the independent wireless operators, increasing capex 12 percent this year.
Stéphane Téral, principal analyst for mobile infrastructure and carrier economics at Infonetics Research, recently, said: “With investment plans out from AT&T and Deutsche Telekom, combined with the plans of a long list of major and smaller operators around the globe, we can safely say that 2013 and 2014 will be positive capex years, which is good news for vendors. Deutsche Telekom’s €30-billion 3-year investment plan will help lead a return to investments in the EMEA region.”
The major areas of investment through 2015 include fiber-based wireline broadband, 2G mobile network capacity expansion, 2G migration to 3G, and migration to LTE projects.
Weak revenue growth
India’s telecom services sector has recorded gross revenue of Rs 52,937.32 crore during the quarter ended September 2012, an increase of 0.80 percent over the previous quarter at Rs 52,512.10 crore, according to data released by the Telecom Regulatory Authority of India (TRAI). Adjusted gross revenue declined 0.07 percent to Rs 35,473.16 crore during the September quarter from Rs 35,499.01 crore reported during the quarter ended June 2012.
Global service provider revenue is on track to reach $1.9 trillion in 2012, up 4 percent from 2011, Infonetics Research says.
Asia Pacific will account for about 1/3 of global service provider revenue by 2016, propelled by China Mobile, the world’s largest mobile operator by revenue and subscribers.
Outlook
“The managed services market faces a reality check as many of the false promises of high cost savings begin to be shattered, as some vendors struggle to appease investors,” says Aditya Kaul, ABI Research practice director.
“While operators face immense pressure to transform their business and not be relegated to dumb pipes by the OTTs, it remains to be seen if they will trust their managed service partners in helping with this transformation,” Kaul added.
The Asian region is seen as a key market and wireless revenue there is expected to grow 64 percent. Mobile broadband services and the transition from 3G to 4G will also be key growth drivers. But managed services will take a beating as telecom operators are under pressure to improve revenue and planning new business models.
Baburajan K
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