An argument can be made that a growing number of tier-one service providers cannot invest profitably in their networks, even if markets require ever-more capacity. In the recent past, that might have been thought a problem for fixed network operators. Now it appears to be becoming an issue for mobile operators as well. Eventually, regulators will have to consider new measures to support continued investment in access networks, as risk grows, and business models increasingly become unsustainable. 

An analysis by A.T. Kearny suggests that only the top four players in any Southeast Asian geography are able to earn positive financial returns. More importantly, only the top two players in a geography seem to consistently make returns in excess of their cost of capital. Some have argued that is a problem for firms such as AT&T and Verizon as well, arguably pertaining mostly to their fixed networks.

Researchers at PwC studied the financial performance of 78 fixed-line, mobile and cable operators with a collective annual capex of some $200 billion, nearly 66 percent of the industry’s total spend.

The research found that, over the past decade, the average long-term return on investment (ROI) has been just six percent. That is three percentage points less than the cost of the capital itself. In other words, operating revenue is not covering the cost of capital.

At the same time, revenue growth rates are dropping in most markets.