Is the telecommunications industry in decline?

Written by Marius van Wyk

3 September 2019

A comprehensive financial analysis of eight public listed mobile operator (MNO) corporations, with an aggregate subscriber base of 1.8  billion subscribers, representing  23% of all global  connections, reveals a clear downward trend in all financial ratios for the period 2011 to 2017.  These MNO groups have a footprint across 5 continents, with operations in 92 countries. The MNO groups in the sample are: MTN, Orange, Vodafone, Millicom, Ooreedoo, Zain, Etisalat and Bharti Airtel. These operators offer telephony, data, mobile banking and digital services.

The metrics, ratios and trends analysed are: subscribers, revenue, ARPU, cost-to-revenue, profit margins (operating, EBITDA, PBT), asset turnover, ROA, ROCE and share price versus market index performance. It is found that all profit margins and investment returns have been declining, consistently, as demonstrated in the slides that follow.

An industry analysis, based on the Porter’s Five Forces framework, suggests mostly strong competitive forces. Competition is predominantly price based, having degenerated into fierce price wars in a number of markets. There is a high prevalence of product commoditisation across the industry. The impacts of OTT and regulatory involvement are significant. There seem to be non-collusive oligopolies present in a number of markets.

Is the telecom industry finally entering a maturing or perhaps declining phase? Is it stuck in a typical red ocean? Has a new business model become necessary? What are the available strategy options?  You can find answers in our full report, which is available at request.



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