| NOTAS: | "The telecoms industry has been relatively resilient during the economic downturn. Although the downturn has not put as much downward pressure on telco top lines as what we might have thought, revenue growth is in decline for many mature market operators and slowing for those in emerging markets. The key factor at play here is market saturation, particularly in mature markets. To say that the economic downturn has had little impact on telcos would be wrong. As the economic climate began to worsen, many implemented wide-ranging cost-cutting measures, targeting opex and capex in a bid to maintain margins and improve cash flow. This was essential as credit was difficult to source (as a result of the credit crunch), and uncertainty over the severity and duration of the downturn led telcos to stockpile cash in order to see them through the worst. At the same time, the cost reduction benefits of transformation programmes began to flow through for a number of early movers. Economic recovery is predicted, with a return to growth in 2010 across the globe. However, regional disparities will remain, firstly between mature and emerging markets, and also within regions, depending on the financial stability of individual economies. It follows that those telcos with operations in emerging markets will benefit significantly from their growth and a resultant uplift in revenues. The fortunes of those based in mature markets will vary depending on the markets they operate within, but with little potential for additional organic growth and confidence returning to financial markets, we would expect M&A activity to pick up considerably. Incumbent operators with large stockpiles of cash, and relatively few financial burdens (such as debt, or pension deficit repayments), will drive much of this activity. Capital spending will be the first indicator to pick up during 2010, having been cut back during the downturn. Many telcos see investments in next-generation access (NGA) as crucial to their future in enabling new services to be provided to end users." |
