Friday, 20 July 2018 13:58

Telcos face tough times adapting to market changes: report Featured

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Telcos face tough times adapting to market changes: report Image courtesy of renjith krishnart at FreeDigitalPhotos.net

Global telecommunications companies are under intense pressure to adapt in a rapidly changing market, as they face dramatic changes in the political, business, and economic environment and the accelerating pace of technological innovation, according to a new risk report.

The latest risk factor survey from business advisory firm BDO says that unexpected risks and long-term pressures felt by the telecoms industry as a whole means that winners in the telecoms sector are those companies who “proactively find ways of updating and expanding their value proposition and manage the risks facing the industry”.

And the survey — covering telecoms companies in key markets in the Americas, EMEA and Asia Pacific regions — reveals that that telecommunications executives have relegated disruption from new technologies to third place in their risk top five, with the number one risk identified by 60 telecommunications companies surveyed right now is exchange rate volatility.

  1. Exchange rate/foreign currency changes
  2. Increased competition
  3. The fast arrival of new technologies
  4. Access to finance
  5. Interest rate pressures.

On what the report describes as the “fast arrival of new technologies”,  BDO says that services like Skype, WhatsApp and Viber have all taken substantial chunks out of the telecoms market.

“Put bluntly most customers would today consider an offer of ‘unlimited texts’ as a poor joke. Changing customer demands are tied to the arrival of new solutions and technology, making it imperative for telecommunication companies to react to the risk they pose to existing services and revenue streams.

“As the tempo of technological innovation shows no sign of slowing, risks arising from  new technologies will likely also continue to increase,” the report warns.

BDO also says the telecoms industry is going through a period of continued consolidation, with regional and national competition for market dominance.

And increased competition is one of the growing risks identified in the BDO risk survey, continuing a trend from both 2016 and 2017.

“Competition is not contained to the telecoms industry, as new entrants, often from the technology sphere, continue to challenge existing business operations and solutions putting even more pressure on prices and earning potential,” the report says.

According to BDO, the telecoms market is especially vulnerable to volatile exchange rates because of its growing cross-border customer base – with global incidents including Brexit, the North Korea negotiations, regulatory agendas and Trump’s trade war just a few of the risks that shake up exchange rates.

BDO cautions that telecommunications’ structural dependency requires capital to upgrade and build the infrastructure to keep up with markets’ technology expectations, underlying two further risks in the top five - namely, access to finance and interest rate pressures.

According to BDO, credit ratings in the industry are not at the levels they used to be, and profit per customer seems to be falling, which means that access to funding presents a significant risk.

The report shows that, in the same vein, telecommunications executives rate profitability risks as being three times higher than in 2017 – with risks associated with gaining market share up by 100% in BDO’s risk survey, while risk from saturation/decline of the telecoms market is up by 80%.

Natalie Milne, national lead, TMT at BDO said: “The mix of short-term, unexpected risks and long-term pressures felt by the industry as a whole, means that winners in the telecoms sector are those companies who proactively find ways of updating and expanding their value proposition and managing the risks facing the industry.”

To view the full report from BDO click here


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Peter Dinham

Peter Dinham - an iTWire treasure is a mentor and coach who volunteers also a writer and much valued founding partner of iTWire. He is a veteran journalist and corporate communications consultant. He has worked as a journalist in all forms of media – newspapers/magazines, radio, television, press agency and now, online – including with the Canberra Times, The Examiner (Tasmania), the ABC and AAP-Reuters. As a freelance journalist he also had articles published in Australian and overseas magazines. He worked in the corporate communications/public relations sector, in-house with an airline, and as a senior executive in Australia of the world’s largest communications consultancy, Burson-Marsteller. He also ran his own communications consultancy and was a co-founder in Australia of the global photographic agency, the Image Bank (now Getty Images).

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