As new countries like China and India emerge in the communications landscape, the industry is undergoing major changes in mature markets that are significantly modifying the industry ecosystem. New business models, new technologies and new players are affecting the industry balance and forcing traditional players to react and evolve toward new models and new organizations. In particular, mergers and acquisitions have become the key growth strategy of the main players to create value and address the increasing competition of new players in a converged and digital industry.
Four main trends are affecting the communications industry in mature markets and driving consolidation: decelerating growth in the wireless and broadband sectors, a new wave of cost optimization in the wireline industry, an IP revolution well underway and increasing competition due to new players.
Decelerating growth
The wireless industry has recently transitioned from high growth and acquisition focused business models to flat growth and retention focused business models. In Europe mobile penetration is forecast to reach 100% in 2007 from 90% in 2004, according to Analysys Research.In Asia mature markets such as Hong Kong, Taiwan or Singapore are saturated with mobile penetration of 100% or more. In the US the mobile penetration has reached 70%, according to the Cellular Telecommunications & Internet Association. As mobile penetration rates increase around the world, the focus for mobile operators has shifted from customer acquisition to customer retention.
At the same time, the broadband industry continues to grow but at a decelerated rate and will soon reach saturation. Broadband penetration, in terms of households, is set to reach 41% in 2008. However, broadband is not expected to grow quickly in Europe, according to a survey by Internet research firm Jupiter MMXI. In the US broadband penetration was about 30% in 2005. Hong Kong and Korea lead the way globally with broadband penetration of more than 70% in 2005. But the growth rate from one quarter to the next is low -- an average of less than 5% among the top 20 countries.
The paradigm, governing communications industry business models, has shifted from a "hunter" (acquire new customers at all costs) strategy to a "farmer" (keep existing customers while reducing costs) strategy.