Telecom NZ CEO: Industry Outlook Bearish

Telecom Corp. of New Zealand Chief Executive Paul Reynolds remains bearish about the short-term outlook for the communications industry, in New Zealand and most of the developed world as well, but as you would expect, says his firm, and others, are prepared for what they must do.

However, the telecommunications industry faces tough times and profound challenges in New Zealand and all around the world, he said.

"Revenue growth has stopped for telcos in mature economies," he notes. "There's no growth in Australia, Europe or the U.S., and none in New Zealand."

In New Zealand, total revenues are predicted to decline slightly over the next three years, Reynolds says.

Competition in traditional voice and data services were causing revenues to decline quickly, while growth areas like mobile, information technology and broadband were struggling to fill the gap, he says.

It is obviously not the concern of any end user that Telecom and other firms have to manage for a no-growth environment. But it has to be a concern for policymakers, capital markets and industry executives that this is the case.

To the extent that there is no possibility of providing new services, better services and lower prices without a return to growth, it arguably doesn't make sense to put barriers in the path to transforming the business. It sometimes makes sense to put new regulations and place new obligations on businesses with a strong public service character and robust earnings.

It arguably does not make sense to saddle declining businesses with additional burdens at a time when they simply cannot bear them. Otherwise one simply hastens the speed of the decline.

Telecom NZ CEO: Industry Outlook Bearish But Telecom Prepared - WSJ.com (subscription required)