In Business Model, Internet Access, Mobile

There are two fundamentally-opposed views of the “telecom industry” and its prospects, longer term. In the near term, many would argue it remains a big, powerful industry. But history is less important than future results.

What is important is what happens over the next couple of decades. And there lies much room for debate. One view is that the industry either must be restrained or reshaped so that other industries that rely on it can drive economic growth.

Crudely, that view is that the lower telecom costs become, the better for the app and service industries that rely upon it and represent the real opportunity for positive economic results.

The other view is that the industry is in an actual decline phase. That calls for entirely-different policies, even assuming the goal is to underpin the growth of content, app device and other industries that use communications and computing as an input.

Telecom policy varies radically, based on your own view of what is happening. If you believe the telecom industry is a big, powerful industry with a sustainable business model, you might propose a set of policies to limit that power.

If you think telecom is a declining industry that will face fundamental issues with its business model, you might propose an entirely-different set of policies.


But either view requires that industry capital and operating costs get lower, perhaps vastly lower. One might well argue that the cable TV industry’s success in high speed access, enterprise communications and fixed network voice have been supported precisely by the industry’s lower cost structure.

That is happening. Consider the first half 2015 results posted by Bouygues Telecom.

Bouygues Telecom now is forecast to do better than believed when the last full-year forecast was made in May 2015.

Bouygues Telecom also is expected to do better than it did in 2014, in terms of revenue.  But Bouygues Telecom might still lose money for the year. In the first half of 2015, the firm lost about €54 million.

The company reported a current operating loss of €54 million in the first half of 2015, €17 million better than in the first half of 2014.

Including an extraordinary (one time) item–costs related to network sharing with Numericable-SFR–the operating loss was €109 million.

Bouygues Telecom revenue remained stable in the second quarter 2015 at €1.1 billion, down one percent from the first quarter. The firm booked €2.2 billion revenue in the first half of 2015.

First-half 2015 EBITDA rose €21 million to €323 million, while EBITDA margin grew 1.5 points to 17.1 percent.

The point is that improvements on the cost side now will make the difference in outcomes, as revenue growth is limited.

That focus on long-term industry health is as relevant in developing markets as in developed markets. Mobile voice and messaging revenues in Western Europe are expected to fall by as much as half between 2010 and 2020.

Mobile operators in India warn that voice revenues could fall 30 percent to 50 percent in the face of competition from over-the-top apps and services. Applying new regulations to OTT voice and messaging that reduce price arbitrage will slow the change in revenue composition.

But it seems unlikely anything can halt a long-term change in revenue sources, in India or anywhere else. Long term, voice and messaging revenues will fall.

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