An annual poll of 105 telecommunications and media providers across 15 countries suggests that core European telecoms revenue will dwindle by 1.8 per cent a year every year until 2015.
Management consultancy Arthur D Little, with equity broker Exane BNP Paribas, has prepared a report on its 11th annual survey, which suggests that the main telecoms opportunity from now on will be in diversification and cost transformation. Operators must make the "right strategic choices" in their markets as core revenue declines, it said in a statement, adding: "Act now".
"The move to an all-IP world where everything is connected presents a major threat to telecom operator core voice and SMS revenue, but also significant opportunities for these operators to extract value from adjacent markets," the consultancy said.
The report, entitled Telecom Operators: Let's Face It, said the fall in telecoms and pay-TV profits is being driven by a combination of macroeconomic headwinds, regulatory intervention and strengthening competition from players such as Google, Apple and Skype.
Suitable adjacent markets for telecoms include verticals such as automotive, energy and utilities, and financial services. Revenue from these kinds of areas could be expected to account for four to nine per cent of their revenue by 2015.
"[That is] not enough to reverse the overall negative trend," the consultancy noted. "In this context, telcos must accelerate their cost transformation."
Mega-operators, local specialists and infrastructure-focused plays would emerge as a result across Europe, it said.
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