1/3 of Telco Execs Ponder Moves "Up the Stack" into Applications

There are very good reasons why global telecom executives are looking for a range of new revenue generators: the legacy revenue streams are shrinking.

Over the past several years, the telecom business has entered a period of slow decline, with revenue growth down from 4.5 percent to four percent, EBITDA margins down from 25 percent to 17 percent, and cash-flow margins down from 15.6 percent to eight percent, say Paul-Louis Caylar and Alexandre Ménard, McKinsey partners.

Among U.S. telecom companies, landline and mobile voice now account for less than a third of total revenues, down from 55 percent in 2010.

Over the last half decade, mobile data revenue growth has offset the losses in voice and messaging. Mobile data, in fact, now represents 65 percent of total revenues. In 2010, mobile data represented just 25 percent of total revenues.

A third of the 104 respondents to a 2015 McKinsey survey of senior industry leaders said they were preparing to move into adjacent businesses such as financial services, information technology services, media, or utilities in search of new opportunities and revenue streams, McKinsey says.

With the possible exception of media services, most of the opportunities seem to involve Internet of Things to a great extent.


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