Contact: Jo Ouvry
Deloitte
Public Relations
+44 (0) 20 7303 0587
The Technology, Media and Telecommunications (TMT) practice at Deloitte today announced its predictions for the telecommunications industry in 2006, forecasting that the year ahead will be marked by the fact that globally, the total number of paid-for connections will exceed four billion.
Tony Cooper, telecommunications partner at Deloitte comments:
“2006 will see a record reached for the highest level of connectivity in the telecommunications market, across Public Switched Telephone Networks (PSTN), mobile communications, broadband connectivity, and Voice over IP. Connections will be driven by existing users adding to their portfolio of communications tools as well as some people becoming connected for the first time. 2006 will turn out to be a frustrating year for 3G, with slow take up. 2G will represent the majority of revenues, profits and growth for the mobile sector. 2006 will also see phone manufacturers focusing more attention on design, with style over function becoming more important with consumers willing to pay a ‘style premium’.”
“The telecommunications industry should not overlook a significant source of new connections – machines. Previous disappointments arising out of poor performances are likely to become a thing of the past in 2006, as many of the underlying enablers for machine-generated communications matures. This promises to provide a range of benefits for both consumers and businesses.
“2006 will the year operators, both fixed and mobile, realise that the frenzied quest for speed does not always lead to success, as crucial factors such as real market needs and profitable business models may be overlooked. Bandwidth is undoubtedly important, but it is not as important as many other variables in the telecommunications world – particularly services.
“The communications industry will undergo intense M&A activity in 2006. Telecommunications companies that have amassed significant cash piles and are ready to invest – as are other potential acquirers, including, significantly, financial institutions and companies from other sectors looking to diversify.
“Convergence will remain a key focal point for companies in 2006, but to avoid being bystanders, telecommunications operators will need to develop business models that generate additional connectivity revenues for an event, or as part of a service charge.”
“This year should also see two different types of VoIP take shape. Managed VoIP services are likely to allow operators to generate a positive cash flow, however ad hoc VoIP will likely struggle to gain a mass market, revenue-generating following.”
Three of the key trends identified in the report are:
1. Telecommunications proliferates
The global telecommunications market should reach its highest ever number of connections in 2006, with aggregate paid-for connections exceeding four billion. Mobile telephony will likely contribute a half billion connections, particularly from developing countries, but broadband is forecast to grow to 300 million connections, and it is estimated that VoIP will have 40 million subscribers by year-end, more than double its number in 2005. Competition between operators is on the rise, and it may be useful for them to start thinking about margins per user as opposed to revenues per user, with an emphasis on more frequent use rather than more users.
2. Communications gets stylish
Design is likely to play an increasingly important role in the communications sector in 2006 and an industry trend towards devices that emphasise style over function is forecast. The market for communications devices is worth over $100 billion annually, mainly from mobile phones. Increasingly, consumers who are confused by additional functionality may be prepared to pay a `style premium’ for well designed devices emphasising style and ease-of-use. Mobile phone manufacturers should consider, therefore, that consumers may well prefer several devices – one optimised for voice, one for data – than a lowest common-denominator device that does both.
3. Connecting machines for revenue growth
There are already more machines on this planet than human beings and their capacity to communicate is a hugely under exploited opportunity. Connecting these devices could yield many real and potentially lucrative opportunities in both the consumer and business sectors. For consumers, adding connectivity to a range of devices makes all the devices more valuable and useful. For businesses, remote data collection, monitoring and reporting – which are already feasible – can improve efficiency and responsiveness.
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Notes to editors
Predictions methodology
These predictions have been compiled by Deloitte Research on behalf of Deloitte Touche Tohmatsu’s (DTT) Technology, Media and Telecommunications (TMT) Group. The major inputs used in writing the predictions were: input from the 5000-strong TMT team around the world, discussions with leading industry and financial analysts, interaction and conversations with clients from the telecommunications and related sectors. These predictions do not claim to be fully comprehensive, but rather provide a commentary on major industry trends and developments.
About DTT’s TMT Group
The TMT Group is composed of service professionals who have a wealth of experience serving technology, media and telecommunications companies throughout the world in areas including cable, communications providers, computers and peripherals, entertainment, media and publishing, networking, semiconductors, software, wireless, and related industries. These specialists understand the challenges that these companies face throughout all stages of their business growth cycle and are committed to helping them succeed. DTT is a leader in providing strategic, financial and operational assistance to its TMT clients.
About Deloitte
In this press release references to Deloitte are references to Deloitte & Touche LLP which is among the country’s leading professional services firms, providing audit, tax, consulting and corporate finance services through more than 9,000 people in 21 locations. Known as an employer of choice for innovative human resources programmes, it is dedicated to helping its clients and its people excel. Deloitte & Touche LLP is the United Kingdom member firm of Deloitte Touche Tohmatsu (‘DTT’), a Swiss Verein whose member firms are separate and independent legal entities. Neither DTT nor any of its member firms has any liability for each other’s acts or omissions. Services are provided by member firms or their subsidiaries and not by DTT. Deloitte & Touche LLP is authorised and regulated by the Financial Services Authority. The information contained in this press release is correct at the time of going to press.
