Carriers will struggle to maintain market position

The impression of many is that telecom carriers seems to be immune to the so-called recession is not totally true. Carriers are affected by the ongoing economic slowdown plus they have to compete with the other players.

Shifts in customer demand, a changing competitive landscape, a weak economy and new government policies will shape carrier strategies during 2009 and 2010, according to Gartner, Inc. Carriers will struggle to maintain and grow their market position in this shifting landscape, and success will demand investment strategies that are aligned with the pace of recovery in each country and region. Those with a strong cash position will have an opportunity to outpace their competitors through targeted acquisitions and service innovation.

Gartner expects three major new trends to affect carriers’ market positioning domestically and globally as the economic crisis both restricts access to capital and reduces consumer demand, and as government policies — designed to soften the impact of the financial crisis — mitigate market forces.

Trend 1 — Consumers Will Demand More for Less From Their Carriers
With consumer confidence approaching historic lows in most regions and the macro economy likely to remain weak through 2010, consumers are enjoying increased market power and focusing their spending inside the home. While this “cocooning” phenomenon means in-home communication and entertainment expenses are protected to some extent, most consumers will not want to adopt new services unless they are essentially free.

Trend 2 — Forward Thinking Carriers Will Change Their Cultures
In the face of lower revenue expectations, many carriers are making workforce reductions. However, Gartner maintains that they will not be enough and that ultimately, carriers will need to experiment with different ways to transform the businesses and operating cultures in order to prosper. Some innovative partnering arrangements have already been pursued to distribute risk, reduce cost structure and share intelligence. These include: network sharing arrangements; outsourcing of traditional “telco” functions; and professional labor augmentation to fill temporary skill gaps. Gartner advises carriers to explore and utilize the risk and revenue-sharing arrangements that partnerships afford to maximize network investments.

Trend 3 — Leading Mobile Carriers Will Avoid the Commoditization of Their Services
Fixed broadband has been a good business for carriers. However, the fixed broadband platform is now a platform from which over-the-top providers can generate revenue from multimedia and voice services and build their own relationships with users. Unless they pay careful attention to the user experience, many mobile carriers will create exactly the same situation on their mobile networks.

Gartner predicts that progressive carriers will redirect a large part of their investment into better understanding the user experience and improving it, to keep both customers and regulators happy. Gartner also suggests that the best way to offer customers more value and for carriers to differentiate themselves from others is to bring in innovation from outside the business and allow other entities to build services on top of carrier platforms.

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