For the past few years I have been saying that we are amidst a Titanic shift in the telecom landscape; the center of gravity moving away from the U.S., leading to the rise of new telecom giants which in turn is fueling the rise of upstart equipment makers, such as Huawei and ZTE Corp. A report from research firm Telegeography brought it all back into focus for me. Take a look at the sharp declines in revenue and growth at the mightiest telecom companies in the world.
These 10 saw their quarterly revenues decline by 4 percent year-on-year (again, when measured in their local currencies), with Sprint-Nextel (s S) posting a 12 percent drop. Many of these companies are focused on a single geographic market that is growing slowly and is highly competitive. And now compare this reversal of fortunes with the gains posted by some of the newer players, which are clearly supplanting the giants at the top of the totem pole.
China Mobile, Vodafone (s vod) and America Movil fit into the first camp while China Unicom, Vivendi, China Telecom and Verizon (s vz) are in the latter. All of these companies reported Q1 2009 revenues that were at least 10% higher than their respective Q1 2008 turnover.
Vodafone has benefited from its move to fast-growing markets like India; as we reported earlier, China and India are continuing to grow at a rapid clip. With Indian telecom giant Bharti looking to merge with South African player MTN, there is a good likelihood that we will see the combined company crack the top 10 very soon.
Om – Could this be because most of the carriers see a declining Wireline Revenue added here which masks their Wireless growth. For example, ATT had wireless growth with data penetration increasing but maybe a decrease in wireline revenues. So, comparing them to operators who are pure Wireless might not be apples vs. apples. But, the overall message does make sense.
And wireless revenues in North America are going take a hit over the 18-24 months as people continue to drop out of existing plans and go to pre-paid services to save a couple of bucks…
This isn’t so much about large versus small, but rather about whether the companies have a significant presence in mobile (which is still growing in most places) and whether they are participating in emerging markets. The fastest growing operators (but also often the least profitable) are those serving emerging markets.
Great information. Goes to show how the overall decline in consumer and business spend is affecting these giants.
One quick note, Verizon’s revenue growth if you include the acquisition of Alltel puts them above that 10% revenue growth. Not including it, their revenue growth is not as impressive. With $65B in debt now and the capex costs for deploying FIOS, it will be interesting to see how they perform for the remainder of 2009 and in to 2010 from an EBITDA and cashflow basis.
Thanks for the insightful information.
A corollary that comes to mind is
Japan growth led to NEC and Fujitsu enjoying a big chunk of that business
EU growth lead to Ericsson and Alcatel
US Growth led to Cisco and Lucent (which then became ALU) – you could argue Cisco drove the market as well here to start with.
China growth enabled Huawei and ZTE
The last big geography left is India – which is split amongst the players above today – but is it the right time for an India focused Telecom company or too late.