Financial analysts frequently do disagree about prospects for any particular public telecom, cable, satellite or other communications firm, as well as the suppliers to them. So it is not surprising that some are bearish on AT&T, Verizon, Vodafone and other tier-one service providers.
In a broad way, many could argue that business model changes now are starting to affect most telcos globally, even if there has been a growth divergence between developed market and developing markets for more than a decade.
The fundamental problem is market saturation, where it comes to all legacy services that drive revenue, leading many to predict a major wave of consolidation lies ahead, caused at least in part by spectacular change in revenue sources.
Much of that change is driven by changes in the value of access. At least some knowledgeable observers argue that massive consolidation, reducing the number of global tier-one carriers by about 90 percent is what some believe is coming.
One financial analyst worries because tier-one communications service providers appear to have no competitive "moats" that protect it from competition.
Telcos, in fact, are considered low-growth dividend payers, but companies in low-margin, hyper-competitive industries tend to be risky payers that cut their dividends when times get tough, some argue.
Telcos also are not "future proof,” with business models impervious to disruption by technology or substitute products and revenue models.
Some say “safe” firms and industries have demand for the underlying products that is growing or at least very stable.
Safe dividend-payers also should pay out a relatively low percentage of its earnings as dividends, some critics argue.
On all those dimensions, some worry about the tier-one telcos.
The worries are not misplaced. Many could agree that big threats exist. But that is precisely why some observers are insistent that tier-one telcos act as though they will have to replace at least half their revenue over the next decade . Indeed, they likely will have to do so in every decade.
Few likely believe this will be easy. That is why so many believe massive consolidation is inevitable. But some firms in the industry have been able to achieve such transitions, once or twice over the last few decades.
Service providers whose revenue models once were driven by long-distance and business revenues then evolved to models based on mobile communications. Cable TV providers who once sold only subscription TV now drive their businesses on the strength of internet access revenues.
Consumer-focused cable now also will find its future revenue growth lead by services for business customers rather than consumers.
Firms that operated only in a single country now routinely operate in many countries. And a few now earn substantial revenues from content and related lines of business rather than communications services.
It will not be easy to sustain almost-perpetual revenue model transitions. But neither is it impossible.
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