Ovum Analysis --

Challenges faced in 2009

David Kennedy, Research Director (Asia-Pacific) at Ovum

In the wake of the financial market turbulence, Ovum expects 2009 to be a challenging year for the Asian telecommunications industry.

“Telcos in the Asian region were already facing many challenges,” said David Kennedy, Research Director (Asia-Pacific) at Ovum, “but the financial crisis will add a new element of uncertainty”.

“Ovum does not expect the crisis to hit Asia as hard as the US, but declining US domestic demand will certainly affect Asian exporters and hence the rest of the economy. That includes telcos,” said Mr Kennedy. The impact on the telco sector will be mixed. Slowing economies will hit revenue growth, increasing short-term pressure to cut costs. “We expect many planned infrastructure projects to be delayed or cancelled in 2009”, advised Kennedy.

“But it is also time for telcos without a clear transformation program to start planning their pathway to a permanently lower cost base. This will require more spending on IT systems and new network technologies in the medium term. This will require telcos to generate clear business cases for investment and develop strong execution skills.”

“The good news is that transport budgets are likely to be an early target for cost-cutting across the economy. That could mean growing demand for national and international telecommunications services, especially in the enterprise sector. And advanced telecommunications services like mobile and broadband, once regarded as discretionary by consumers, are increasingly regarded as essential”.

These pressures will drive several new trends in the Asian telco market:

• An accelerated shift to customer focussed strategies and structures. As customers tighten their belts, they will be looking for better value for money. This will require telcos to target their product development and pricing strategies more carefully to address different customer segments.
  
  
• Accelerated multi-play strategies. Telcos that have not already done so will accelerate the introduction of multi-play products to lock in choosy and price-sensitive consumers.
  
• Faster integration and synergisation of international investment strategies. Higher hurdles for telco investment and rapid exchange rate movements will make it harder to expand international investment strategies. The focus will shift to exploiting synergies to maximise the benefits of existing investments.
  
  
• Slower handset replacement cycles. In mobile, handset replacement cycles will lengthen and higher-end models will potentially be passed over for cheaper alternatives. This will have the effect of slowing the growth of mobile data traffic.
  

-Ends-

Notes to Editors:
To speak to David Kennedy in more detail, please contact Tanisha Kuckreja on +613 9601 6723 or Tanisha.kuckreja@ovum.com

About Ovum
Ovum is a global advisory and consulting firm. Its primary activity is providing value-added advisory services and consulting to retained and project clients. The company acts as a well-respected and trusted source of industry data, knowledge and expertise on the commercial impact of technology, regulatory and market changes. Ovum engages in continuous research and industry analysis to determine market dynamics in its specialist sectors.

Ovum has developed long-standing relationships with many of its corporate clients, which include major international blue-chip companies such as Alcatel-Lucent, AT&T, BT, Cable & Wireless, Cisco Systems, Deutsche Telekom, Fujitsu, HP, IBM, Microsoft, Telstra and Vodafone.
Ovum is part of the Datamonitor Group.


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