Upbeat about the downturn

With telecom vendors including Motorola and Ericsson shedding thousands of jobs, Alcatel-Lucent continuing to make a loss from its mobile network making division, and Nortel filing for bankruptcy, the telecoms sector is clearly feeling the effects of the global economic crisis.
Upbeat about the downturn
By Roger Field
Wed 04 Feb 2009 04:00 AM

With telecom vendors including Motorola and Ericsson shedding thousands of jobs, Alcatel-Lucent continuing to make a loss from its mobile network making division, and Nortel filing for bankruptcy, the telecoms sector is clearly feeling the effects of the global economic crisis.

A slowing world economy has also started to take its toll on many operators, although they are likely to be more sheltered from the recession than vendors.

In the US, Sprint Nextel, the country's third-largest mobile operator, said it will cut up to 8,000 jobs - or more than 14% of its workforce - in a bid to save $1.2 billion, while on the other side of the Atlantic, UK operator BT Group made its second profit warning in three months.

In the Middle East, the general consensus among telecom professionals seems to be that the sector is more immune to the recession than most, although this did little to stop STC from experiencing a 62% fall in profits in the fourth quarter of 2008.

While STC attributed this to the effects of currency fluctuations on its foreign investments, the drop in profits served as a warning to other operators to avoid complacency.

Certainly, research carried out by CommsMEA this month indicates that the directors of the region's operators are assessing the impact of the financial crisis carefully, and many are optimistic that they will be able to continue with expansion plans or at least use the downturn as a chance to consolidate their operations, many of which have seen rapid growth in the past two or three years.

While operators with deep pockets will no doubt seek to benefit from falling asset prices to continue with expansion plans, whether rolling out new networks or even making acquisitions, operators on tighter budgets and unable to access bank finance may have to take a fresh look at their operations to navigate the downturn.

Surprisingly, they may have more growth options than they expect. For example, a new report from consultants Oliver Wyman says that ICT companies can benefit from developing alliances with their rivals to share infrastructure, in order to expand without the need for making big capital investments.

Similarly, firms can also look at ways of using their existing assets to serve more customers, or to offer existing customer new services.

Few would deny that the coming year will be tough for the telecoms sector, but the economic downturn could also become a driver of innovation.

Roger Field is the editor of Communications Middle East & Africa.

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