|Analysys Mason Global Revenue Growth Forecast|
One would expect service providers to focus their sales and customer efforts in market segments where telecom industry revenue growth is highest, or where profit margins are highest, in both retail and wholesale portions of the business.
In the wholesale telecom business, that should mean attention to buyers of IP data capacity rather than voice, mobile buyers instead of fixed network buyers, large buyers rather than smaller buyers and content providers and “new customer verticals” more than some traditional customers, for example.
Findings of a survey conducted by Atlantic-ACM of global wholesale buyers suggests that principle is at work in the wholesale telecom business.
Though overall buyer satisfaction has remained stable since 2010, it appears smaller wholesale customers are less satisfied than they once were, while large customers are more satisfied than they used to be.
Early in 2014, satisfaction among large customers virtually leaped five percent among large customers. On the other hand, satisfaction among smaller customers declined 0.5 percent early in 2014.
Customers in fixed network verticals reported satisfaction levels 1.1 percent lower, while satisfaction among customers with operations in mobile service grew 5.3 percent.
Customers in “emerging markets” (cable/content/ISP verticals, resellers/systems integrators and data center/hosting/cloud providers) reported satisfaction levels 2.1 percent higher.
It would be reasonable to assume further changes in satisfaction will occur over the next decade, since the volume of sales, and the attendant profit margins from some products, are expected to decline.
For example, U.S. local wholesale voice revenues will decline from $6.1 billion in 2013 to $5.4 billion in 2014, according to Atlantic-ACM, while U.S. long distance wholesale voice revenues will decline from $2 billion in 2013 to $1.6 billion in 2014.
In a market with total U.S. telecom revenue in the $400 billion range (including video entertainment revenues), that level of wholesale voice revenue is almost nothing.
Elsewhere, wholesale revenue likewise is dropping, propelled in some cases by mandatory price reductions imposed by regulatory authorities. In addition to lower retail prices, lower demand also is an issue. Not only are retail voice prices dropping, people are consuming less fixed network and in many cases also mobile voice.
In the United Kingdom, there is some evidence that aggregate wholesale revenues began to decline, as a percentage of total service provider revenues, in 2011.
Total European wholesale revenue declined by 6.2 percent in 2012 to $45.1 billion, Ovum estimates, while service provider retail revenues fell by 10 percent in the same period. As you might guess, voice revenue declines were key drivers of the change.
In 2012 the European wholesale fixed voice sector accounted for less than a third of total wholesale revenues in the region, while revenues were 13 percent lower than in 2011, part of a downward trend in place for more than a decade.
Under those conditions, one would expect suppliers to focus on growth segments (new customers, apps or geographies) while deemphasizing declining and small segments.
One of the shifts is regional. Already, retail revenue is declining in three regions--Central and Eastern Europe, Western Europe and developed Asia--while growing in the “emerging” parts of Asia, Latin America, Africa and North America.
And where retail revenue grows, wholesale revenue is likely to follow.
Analysys Mason predicts that retail revenue worldwide will grow at a 1.7 percent compound annual growth rate between 2012 and 2017, with growth in mobile (3.2 percent) more than offsetting a decline in fixed (–0.6 percent).