Telecom firms 'facing multiple challenges'
Manama, August 29, 2011
Telecom operators worldwide face numerous obstacles to continued success including stagnating growth, heightened competition and growing consumer sophistication, according to research by Booz & Company.
As these trends are still nascent in the region, GCC telecom operators have thus far implemented tactical, short-term initiatives to overcome these obstacles.
But opportunity abounds for GCC operators to prepare for future challenges by adopting a comprehensive cost management plan, addressing incremental efficiencies, process re-engineering and value chain restructuring.
Operators who do not implement wide-ranging plans to manage their costs run the risk of steep declines in profitability.
These new trends, hindering the telecom operators, are starting to emerge in the GCC region, with revenue growth in the telecom sector slowing, competition rising, and consumers increasingly demanding more services and better performance at reduced prices.
'The global operators hit hardest by these trends have undertaken substantive measures to adapt structurally to face these challenges,' said Booz & Company principal Chady Smayra.
'GCC operators also are starting to respond to the trends now emerging in the region through tactical and short-term cost reductions. These moves will prove to be insufficient to mitigate the full impact of the trends affecting the sector.'
By rigorously identifying and applying relevant cost measures, telecom operators can position themselves to weather the on-going industry challenges and extract benefits from leaner operations, the report argues.
There are three waves of cost optimisation that operators need to consider: These are incremental efficiency, process re-engineering, and value chain restructuring.
'Deploying the right mix of these initiatives will enable operators to create or sustain value, outperform their competitors, and secure their sustainability in chosen markets,' said Smayra.
'Although revenue growth is still positive in the GCC region, it has begun to slow recently,' said Booz & Company partner Hilal Halaoui.
'Average returns on assets have dropped by nearly half over the past five years to approximately eight per cent per year, and appear headed toward 5 per cent, level commonly seen in saturated markets.'
'The GCC region recently has seen increases in competition and market fragmentation, as well as a slowdown in growth. Based on the experiences in the other more mature markets, it, too, will soon face added pressure from consumers.
'In response, operators will need to prepare for constrained growth and compensate by creating leaner organisations. Essentially, regional incumbents will have to increase their marketing expenditures, and in turn, try to reduce many other costs,' the expert added.-TradeArabia News Service