If Products Have Life Cycles, Do Industries Have Life Cycles?

source: Software Advice

The state of the global telecom business presents a bit of a paradox: revenue is growing, but perhaps unevenly, and there are fewer companies and employees.

The U.S. telecommunications business represented about $586 billion worth of revenue in 2013, up from about $297 billion in 2008, by some estimates, and from $491 billion in 2008.

That latter level of revenue growth represents 15 percent compound growth rates, according to an analysis by Hello Operator Software Advice.

But that growth is unevenly distributed, and some markets are declining. The notable example is Europe, where mobile and fixed service revenue is under pressure and dropping, despite growth in most other markets.

Virtually all products--perhaps all products--have lifecycles. Perhaps most industries also have lifecycles. And that is the challenge represented by Europe.

Though most observers would argue the regulatory and structural context explains Europe’s revenue woes (incentives for investment are low, fragmentation is high and scale is low), the question of telecommunications market “maturation” is germane in all developed countries, where legacy products are being replaced by newer products.

Voice revenue, which used to drive results, now is being displaced by Internet access and video entertainment. Vodafone’s most-recent financial results illustrate the problem.

“In today’s results Vodafone showed that they have been able to capitalize on a strong demand for superfast mobile broadband, reaching almost five million customers on their 4G networks,” said Dario Talmesio, Ovum principal analyst. “Unfortunately, the uptake of data fails to deliver in financial terms: revenues continue to fall for Vodafone Group, meanwhile margins have severely deteriorated.”

source: Software Advice

“While Africa and India are still growing, what Vodafone needs to sort out are the fundamentals of Europe that is 66 percent of the business,” Talmesio said.

According to Ovum, none of Vodafone’s major markets will be growing revenues in the coming years, meaning that they need to squeeze more off what they have.

source: Software Advice

Also, despite the emergence of new service providers in Asia, Africa and South America, the total number of service provider firms has decreased since 2008.

Also, the number of employees in the global industry dropped between 2008 and 2013.

The number of firms in the industry declined six percent while the number of people employed in the industry dropped by 14 percent between 2008 and 2013.

The point is that while the global industry is growing, in terms of revenues, employees and firms, while the industry arguably is contracting in some regions, in terms of revenues, employees and firms.

The bigger question is whether industries have life cycles, where telecommunications might be in its life cycle, and what the replacement industry might be.