Global telecoms growth has slowed since 2009, but some operators have enjoyed compound annual growth rates of up to 25% over this period. This report examines the financial results of 68 operators over the last seven years, identifies seven successful growth strategies, and evaluates which ones will deliver the best results in 2017 and beyond.
Global, regional and company growth since 2009
The end of meteoric telecommunications services’ growth
For those that have been part of the telecommunications industry over the last 20 years it has been a wonderful ride. Extraordinary growth in fixed-line telecommunications from 1998-2001, as the internet developed, was followed by the explosion in mobile from 2002-2009.
Since 2009, things have been rather different in most markets. Indeed, as the figure below shows, aggregate annual growth from the sixty-eight operators in our group has fallen from over 5% in 2011 to a steady 2-3% from 2013 onwards with no signs of a strong rebound on the horizon.
Aggregate revenue and growth rate for the sixty-eight players, 2009-2016
Source: Company accounts; STL Partners analysis
Some regional differences but growth is slowing for operators everywhere
Operators in Europe and other mature slow-growth markets have focused on building operations in faster growth regions – Telenor, Vodafone, Telefonica, Deutsche Telekom, Orange and others have all expanded into ‘developing’ markets. The problem is that these developing markets have matured fast from a telecommunications perspective and, although operators hope that growing wealth will translate into higher telecommunications spend, there is little evidence that this is happening in a meaningful way – see the figure below. It seems that, once low ARPUs have been established in a developing market, intense competition makes raising prices difficult even if mobile broadband demand is rising fast. This is something we discuss in more detail later.
Revenue split and growth rates by region, 2009-2016
Source: Company accounts; STL Partners analysis
It is worth noting that the figure above reflects where operators are headquartered so, for example, Europe (at a steady -2% growth rate over the period) contains the revenues generated in other markets by the multi-national operators mentioned above. This is true in other markets too. So, for example, Asia-Pacific would include the revenues from Sprint as it is owned by Softbank which is headquartered in Japan.
Nevertheless, because well over 80% of revenues generated in each region are from operators headquartered there, STL Partners is confident that these regional splits and growth rates are relatively accurate and show that all regions have slowed substantially and are now operating in the -2% to 5% per year growth range.
- Executive Summary
- Global, regional and company growth since 2009
- The end of meteoric telecommunications services’ growth
- Some regional differences but growth is slowing for operators everywhere
- Surprisingly consolidated from a financial perspective
- Consolidation is (slowly) increasing
- Huge variation in individual operator’s revenue growth rates
- Flat or declining revenue inevitably correlated with lower profits
- Seven growth strategies used between 2009-2016
- Strategy 1: Enter newly liberalised countries
- Strategy 2: Acquire other major established telecoms operators
- Strategy 3: Enjoy the ride in attractive home market
- Strategy 4: Price-led ‘challenger’ strategy
- Strategy 5: Stronger penetration in existing developing &/or growing markets
- Strategy 6: Cost-cutting for profit growth
- Strategy 7: Develop or acquire new enabling or end user businesses and services
- Which growth strategies are viable in 2017 and beyond?
- The importance of each strategy has changed over time for many operators…
- …and STL Partners predicts that two strategies will start to dominate in future
- Figure 1: The sixty-eight operators evaluated in this report
- Figure 2: Aggregate revenue and growth rate for the sixty-eight players, 2009-2016
- Figure 3: Revenue split and growth rates by region, 2009-2016
- Figure 4: Aggregate revenue distribution across the sixty-eight operators, 2009-2016
- Figure 5: Aggregate operating profit distribution across the sixty-eight operators, 2009-2016
- Figure 6: Average operating margins for the sixty-eight operators, 2009-2016
- Figure 7: The big get bigger – revenue and growth rates by operator size, 2009-2016
- Figure 8: Revenue compound annual growth rates by operator, 2009-2015
- Figure 9: Revenue vs operating profit growth rates by operator, 2009-2015
- Figure 10: Viettel’s approach to entering newly liberalised markets
- Figure 11: The impact of M&A on the ten biggest global operators, 2009-2015
- Figure 12: How du’s focus on the attractive UAE market has yielded results
- Figure 13: Price-led ‘challenger strategy’ in action – T-Mobile’s ‘Uncarrier’ initiative
- Figure 14: Focusing on developing markets – South America has partially offset issues in Europe for Telefonica
- Figure 15: Japan and UK suggest that increasing demand for mobile broadband will not result in eternal revenue growth
- Figure 16: BT’s operating expenditure as a % of revenue, 2009-2015
- Figure 17: Telenor’s performance shows the challenge for telcos to grow organic digital revenues
- Figure 18: Telstra’s M&A strategy to break into the healthcare market
- Figure 19: The seven growth strategies evaluated for suitability in 2017 and beyond