Industry moves from global recession to rationalisation

Over the past 12 months, the global financial crisis has exacerbated already existing difficult market conditions in developed countries and, furthermore, has led to a squeeze in capital expenditure. In 2009, we have seen mobile operators rationalise their strategies to reduce operating expenditure and to preserve cash flow generation (see GSMA Intelligence's report The Cellular Telecom Crunchonomics: One Year On).

In 2010 we expect more operators in developed countries to report a sharp slowdown in net additions linked to user saturation. Voice revenues will keep falling - exacerbated by continued price-wars in the prepaid segment - but overall yearly growth will be balanced by more stable money markets. However, for most large operator groups in these economies, 3G data revenues are unlikely to offset declining GSM voice revenues mainly because the expected surge in demand for data consumption will not be met by required investments to improve network coverage and balance increasing infrastructure cost. On top of that, mobile operators will be rationalising their portfolios of handsets and services further by lowering the number of devices they offer and hedging their bets on high-margin/low-subsidy smartphones. Economies of scale and one-size-fits-all marketing packages will be a general rule across all large operator groups with a global footprint.

Even though most economies have now entered a slow recovery process, the effect of the downturn will be long-lasting and will reshape the telecom landscape. Consolidation and an increase in network sharing agreements will help some smaller players to face mid-term challenges; large groups are likely to sell some shares of their overseas operations whilst some handset vendors will go through a major overhaul (Motorola, Sony Ericsson). Finally, we expect regulators to moderate price-wars in the prepaid segment more closely in emerging markets such as India, Vietnam or Nigeria to ensure long-term solvency of their telecom sectors.

(This article is part of a series of predictions for 2010 from the GSMA Intelligence team.)