In Business Model, Internet Access, Mobile

The telecom industry has had a historical growth rate of about three percent a year. So growth at rates lower than three percent might well be deemed a problem. According to estimates by STL Partners, only in Africa will growth rates exceed three percent, between 2019 and 2022.

In Europe and Western Europe, growth might well be negative over that period. If telecom service provider costs of capitalare 4.6 percent for debt, and perhaps 10 percent for equity, one-percent revenue growth rates are a key problem.

source: STL Partners

Historically, faced with slowing growth, telecom companies have purchased growth by acquiring other firms, in horizontal deals (mobile firms buying other mobile firms; fixed network firms buying other fixed network firms; fixed network entities buying mobile assets; cable firms buying other cable firms).

That will remain an option for some firms. The new problem is that while scale helps with operating costs and gross revenue,  long-term growth might not benefit too much. A bigger firm, growing less than three percent, does not solve the growth problem.  And growth now is the key issue.

Firms might make mistakes when trying to grow outside the connectivity role. But staying exclusively in that role, as a strategy, might also falter, as it does not offer a path to growth.

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