London, United Kingdom:
Arthur D. Little (ADL) has published its annual telecoms study, which highlights the need for greater reconfiguration in the global telecoms industry. Backed by client conversations, a global survey and interviews targeting investors, board members and senior executives of telecom operators, the study has revealed that inorganic growth options are a viable tool for operators to survive in the challenging telecoms market, with more than 90 percent of respondents agreeing. Over 60 percent of respondents also believe that the telecoms sector was facing disruption.
Technology and new business models are disintegrating and reconfiguring the typical telco delivery model, and this is leading to competition from a number of players along the telco value chain. In many situations, organic options beyond cost optimization are limited because the market is reaching maturity. At the same time, telco assets with varying risk and return profiles are becoming attractive to financial investors because telco assets can be mutualized under new ownership. If telcos do not succeed in aligning execution realities with investor expectations, shareholders are more likely to choose other options. One growing trend involves alternate investors that reconfigure or unbundle assets to extract better value.
To secure future growth, telcos will need to take advantage of mutualizing assets and creating focused platforms for growth, transformation and value creation, which is facilitated by disaggregating the telecom value chain. To do this, telcos must continue to make balanced investments between organic and inorganic options:
- Innovate the core based on local competition
- Build capabilities to prepare for the future, particularly digital transformation
- Secure reasons to be part of sustainable economics or drive in-market consolidation to reach sustainable economics
- Accelerate M&A in resulting focus areas beyond the core – i.e., B2C, as well as ICT, B2B2X and wholesale, to prepare for the future (to compensate for stagnating or declining core business).
“Telecom companies are lagging behind other industries in shareholder value creation, while wrestling to define optimal asset structures to prepare themselves for the future,” said Karim Taga, Managing Partner and Global Practice Leader TIME at Arthur D. Little. “Amid substantial competition from within and outside the industry, as well as sustained investment requirements, telcos must explore avenues for growth from both organic and inorganic perspectives in order to effectively embrace the future.”
“Embracing the future,” the newest edition of Arthur D. Little’s annual study on the telecoms industry, is based on more than 100 interviews with senior industry executives, investors and shareholders. It draws from a review of over 4,300 deals in relevant sectors and analysis of operator strategies across the globe.
To download the full report, visit: www.adlittle.com/EmbracingTheFuture.