The Communication, Media & Technology Practice at Booz & Company Paris provides an annual analysis of the trends affecting the TMT sector. In the context of the growth in the Telco industry slowing down over the past 3 years, operators are facing a challenge: the value is shifting towards software providers and IT which oblige them to build a new economic model based on market consolidation, optimization of their pricing models, deployment of advanced technologies, diversification into adjacent markets. The entire industry is really in a turning point.

1. NETWORK OPERATORS
The Communication, Media
& Technology Practice at
Booz & Company Paris provides
an annual analysis of the trends,
growth and major changes
affecting the TMT sector.
OVERALL in 2013
THE VALUE SHIFTED TOWARDS
SOFTWARE, IT AND CONTENT
PLAYERS
Telco growth slowed
down to 1,5% and
operator growth was
only 0,3%. This decrease
was mainly driven by:
TMT REVENUES BY MARKET SEGMENT
2010 - 2013, in $bil.
8%
12%
5.4
1.5% growth
5.8
5.9
Electronic
Components
4.8
The development of low cost/
Electronic
Products
Software and
IT Services
Network
Operators
online brands;
Price wars between operators;
Market commoditization due
to a larger share of online sales
(50% in France) as well as by new
regulatory requirements
(termination rate, roaming revenues)
Intermediation
Media & Content
SLOWDOWN WAS GLOBAL BUT NON EQUAL, OVER THE PAST 3 YEARS
EUROPE (- 2,3%) AND FRANCE (-4,2%) WERE ESPECIALLY HIT
TELCO IS MOVING
FROM A
“CONNECTING
PEOPLE” TO A
“CONNECTING
DEVICES”
BUSINESS
CONNECTING
PEOPLE
Reaching 50bn by
2020, the number
of connected
devices will
achieve
7 TIMES THE
WORLDWIDE
POPULATION
CONNECTING
DEVICES
THE SHARE OF VALUE IS SKEWED TOWARDS SERVICE PLAYERS
by 2020 80% of total revenue opportunity will go to Information
Services Providers leading to the rise of integrated players
providing hardware, software and information services
IN THIS NEW WORLD OF CONNECTED DEVICES,
Handset manufacturers are strengthening relationships with software
providers that now account for 45% of the smartphone revenue. Further,
almost all smartphone manufacturers controlling 96% of the smartphone
market have chosen an OS from one of these software companies
IPHONE
‘07 LAUNCH
‘08
NEW USAGES ARE
DRIVING FAST LTE
ADOPTION AND GROWTH:
ANDROID
LAUNCH
‘09
‘11
FIRST SAMSUNG
ANDROID PHONE
NOKIA / WINDOWS
MOBILE ALLIANCE
In France the number of users has
grown from 1,6 to 3Mn between Q3
& Q4 2013 and from 75 to 182Mn
worldwide in 2012-13
GOOGLE ACQUIRES
MOTOROLA
‘13 MICROSOFT
ACQUIRES NOKIA
2.5-3
LTE USERS IN FRANCE
(million)
1.6
800
70
Q4 12
370
Q1 13
Q2 13
Q3 13 Q4 13e
LENOVO ACQUIRES
‘14 MOTOROLA FROM GOOGLE
GROWTH MODELS
As operators are paying for LTE deployment, they need to build a new
economic model to monetize network cost
1
3
A first option is cost
reduction. This can be
achieved through market
and network consolidation.
For example, network
sharing between operators
can generate savings up
to 50%
A third option is optimizing
revenues. Operators can
accomplish it by improving
their pricing models: users
pay for traffic or make
content providers pay for
broadband used
2
4
A second option is reducing
costs by per Mb. This can be
achieved by developing
advanced technologies such
as LTE - 3 to 4 times more cost
effective than 3G - or by
deploying hybrid network
Finally, network operators are
trying to capture additional
growth by expanding into
adjacencies with limited
impact on their revenues
TELECOM IN A TURNING POINT
THE INDUSTRY IS IN A TURNING POINT, WE SEE THREE POTENTIAL
SCENARIOS AHEAD
OVER THE TOP PLAYERS SQUEEZE OPERATORS THAT
REGISTER – 5% CAGR
THE VALUE IS DISTRIBUTED BETWEEN CONNECTIVITY AND
OTT, OPERATORS AFFECTED BY A DECREASE OF ONLY -2%
CUSTOMERS PURCHASE ACCESS-BASED SOLUTION AND
OPERATORS INNOVATE BY PROVIDING NEW OFFERS AND
SERVICES RESULTING IN A +3% GROWTH FOR CONNECTIVITY