With the caveat that some firms are much-better positioned than others, the typical mobile service provider in Asia risks losing 40 percent of its present revenue over a roughly three-year period, according to equity analysts at DBS Group Research.
A decline in voice and text messaging revenues, plus new competition, are the key challenges, DBS Group Research notes.
That arguably also is true for U.S. service providers, with an added twist: the substitution of mobile services for fixed network voice alternatives.
That has crucial and important business strategy implications. A possible loss of 40 percent of legacy revenue in three years would be catastrophic for almost any firm, in any industry. My own rule of thumb is less dire: a loss of 50 percent of legacy revenue every decade.
In the U.S. market, since 1994, you can see this process at work, as use of mobile services and internet climb, but at the expense of landline voice. That seems to be the case everywhere, these days.
It might be fair to note that rarely have we seen legacy revenues fall as fast as a loss of 40 percent in three years. But a loss of 50 percent over 10 years is to be expected. Some of us would say that from now on, it would be reasonable to expect such attrition of legacy revenues every coming decade, as well.
That, in a nutshell, is why some of us believe there is no alternative for connectivity service providers but to find new revenue sources. We have seen the diversification moves Singtel connectivity revenues has made. To be sure, connectivity revenues are key. But the range of revenue sources is much broader than mobile or fixed access services.
These days, former cable TV provider Comcast gets as little as 20 percent of total revenue from subscription TV services. AT&T likewise has begun a diversification into content ownership, on the Comcast model.
The big question is whether any surviving tier-one service provider (there will continue to be many niches) can lead if it continues to rely nearly exclusively on connectivity revenues.