When emerging markets turn into buyer markets, it has an enormous impact on the future strategy of exporting companies: They have to adapt their products to the requirements of the new market as export only is not enough anymore. But that leads to the demise of a traditional Western dogma, that at least the R&D departments of the companies will not be outsourced. An Arthur D. Little study shows globalization has already captured companies’ R&D departments. Dr. Fabian Doemer, Arthur D. Little’s Managing Partner in Germany says “European companies even take an active role in dislocating their R&D departments to those markets where the products will be bought.”
The telecommunication corporations currently discover the market for energy-services. Following Deutsche Telecom’s move, now Vodafone wants to earn money with the nuclear exit that Germany has decided upon. Vodafone offers companies and public utilities a joint development of virtual power stations so that the companies can lower their energy costs and the public utilities can better coordinate supply and demand of energy. This is essential for Germany’s energy market in the wake of the government’s decision to shut of nuclear power. Arthur D. Little sees growths rates of more than 30 % for the telco-companies within this new network control-market.
An article about Matthew Key, previous CEO of Telefónica. The article states that Key is leading the most explicit effort yet by a mobile phone company to participate in the digital goldrush. Key left his role as CEO of Telefónica, overseeing 30,000 staff, to run a newly created division designed to house just 6,000, working in a rather random assortment of internet and television businesses collected by the Spanish telecoms firm. Arthur D. Little is quoted as saying Telefónica’s revenues from non-traditional business lines could be around €5bn by 2013.
Due to regulations, new IP-technologies and innovative over-the-top-competitors, traditional turnover with telecommunication-services like voice- and mobile transmission are at stake: According to a recent Arthur D. Little-study, European Telecommunication-companies will face an annual drop of about 2% in turnover until 2015. Still though, the consultants from Arthur D. Little see several opportunities in adjacent markets like Financial Services, Automotive or the internet of things for the Telcos, to mitigate the decline.
An increasing number of customers use the TV-cable for high speed surfing. So far, the incumbents in Germany have not managed to provide an answer to that issue. “In the last years, Deutsche Telecom did not extend their fiber optics net sufficiently“, says Dr. Michael Opitz, TIME-Director for Central Europe at Arthur D. Little. But throught the eyes of Deutsche Telecom, the investments into fiber optics are too high and returns uncertain. Therefore the Telecom CEO still asks for help from the government.
The Austrian Business Daily WirtschaftsBlatt reports about Arthur D. Little’s study “Telecom Operators: Let’s Face It”. Karim Taga, Global Head of Arthur D. Little’s Telecommunication, Information, Media and Electronics (TIME) practice is quoted saying that the competition from “Over-the-top”-Players like Google or Apple with IP telephone- and SMS-services will see revenues of telecommunication providers decline. Especially for the Austrian mobile phone-operators this trend means a dramatic loss of revenues of between four and five percent. Taga is, however, more optimistic and sees better chances for the telcos in the new field of IT-Solutions for mobility, energy, retail and health.
European telecommunication companies fight the erosion of their core business through declining revenues from phone calls and internet usage. The harsh competition with aggressive flatrate, triple-play offers and demanding stipulations from regulators puts turnover and margins under pressure. Now, the telcos put their hope in two new areas: new business segments with online-based services including telematics for e.g. remote access facility management and a new business segment with the increasing amount of data being sent through the internet-backbone. Still though, an Arthur D. Little study recently revealed, these expectations will not come true. The strategy consultants see bundling of the several services as a favourable option.
Telefónica is now the biggest European operator in terms of revenue, but the stock market continues to give the company the thumbs down. The article states that after registering a 3.5 percent year-on-year increase in revenues during 2011, to €62.8 billion, the Spain-based operator overtook rival Deutsche Telekom, which saw sales fall six percent to €58.6 billion over the same period. Carlos Abad, Managing Director of Arthur D. Little’s Spain practice, believes the operator is being harshly judged. He is quoted as saying “Telefónica’s value is penalized in excess because of its Spanish nationality and the generally bad market sentiments towards the country. Telefónica has, of course, exposure to the severe recession in Spain, but has acted very decidedly to reduce payroll, retain clients and lower acquisition costs eliminating subsidies.”
An article about Arthur D. Little’s report: ‘Telecom Operators: Let’s Face It’ – the 11th edition of the annual report from Arthur D. Little and equity broker Exane BNP Paribas. The report focuses on the move to all-IP and the impact on European Operators as it creates opportunities for telcos in adjacent markets such as automotive, energy and utilities and financial services. The article states that there is doubt over whether the opportunities will be enough to stem the decline in core revenue and some say telcos will have to take a long-term view, dig deeper into adjacent markets and consider making acquisitions. “When not only everyone, but also everything is connected, surely telecoms should benefit,” notes the Arthur D. Little report.
An article about how addressing new industry verticals could prove to be more of a leap of faith than telecoms operators anticipated. Didier Levy, Director at Arthur D. Little is quoted warning operators if they do not act quickly to address these opportunities, over-the-top (OTT) players probably will. He says the OTT risk could repeat itself in these new verticals… (OTT companies) are experimenting.