Infonetics: Telecom Revenue Growth Stalls as Datacom Growth Accelerates

Infonetics, now part of IHS Inc. (NYSE: IHS), released excerpts from its latest Global Telecom and Datacom Market Trends and Drivers report. In the report, Infonetics analyzes global and regional market trends and conditions.

.    Macroeconomic indicators point to moderate global economic growth of 3 percent for the full-year 2014 due to persistent weaknesses in the Eurozone and a significant slowdown in Brazil and Russia
.    Global mobile service revenue barely budged in the first half of 2014 (1H14), up just 0.5 percent from the same period a year ago, badly dragged by Europe again
.    Mobile data services (text messaging and mobile broadband) rose again in every region in 1H14, driven by the increasing usage of smartphones
.   Mobil broadband services grew 26 percent year-over-year, enough to offset the decline of SMS revenue
.    Key trends affecting the enterprise networking and communication markets include the adoption of cloud services, the use of cloud architectures in enterprise data centers, and security becoming a part of every IT decision 


 Infonetics’ overall market trends and drivers report is published twice annually to provide analysis of global and regional market trends and conditions affecting service providers, enterprises, subscribers and the global economy. The report assess the state of the telecom industry, telling the story of what’s going on now and what’s expected in the near and long term, including spending trends, subscriber forecasts, macroeconomic drivers and key economic statistics (e.g., unemployment, OECD indicators, GDP growth). The 40 page report is illustrated with charts, graphs, tables, and written analysis.

“Overall, growth in telecom revenue continues to slow in every geographic region. Europe’s 5 largest service providers-Deutsche Telekom, Orange, Telecom Italia, Telefónica, and Vodafone-continue to experience declining revenue, though less pronounced than in the past 3 years. And in North America, AT&T and Verizon have signaled that the mobile services price war started by T-Mobile US is taking a bite,” said Stéphane Téral, principal analyst for mobile infrastructure and carrier economics at Infonetics Research.

Co-author of the report Matthias Machowinski, Infonetics’ directing analyst for enterprise networks, added: “After a weak 2013, enterprise networking and communication revenue growth accelerated in 2014 thanks to a resurging North American market and stepped-up investments in security infrastructure. We expect similar results in 2015, when strong end-user demand in North America and Asia Pac is likely to be offset by a slowdown in Europe.”



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.    Mobile broadband overtakes SMS as largest generator of mobile data revenue
.    Infonetics projects Cloud-RAN architecture market to top $10 billion by 2018
.    Ethernet switch market accelerating with 2.5G and 25G Ethernet speeds on horizon
.    iPhone 6 drives uptick in smartphone market
.    Nearly a quarter of all access points are now 802.11ac, shows WLAN market report

Comment & Analysis:

The strong mega trend of using commodity hardware has pressured all IT equipment vendors, especially telecom where there’s fierce global competition from Huawei, ZTE and other Asian equipment companies.  It’s not likely to reverse anytime soon.

Here’s a quote from Infonetics latest Broadcast and Streaming Video Equipment and Pay TV Subscribers report, which tracks pay-TV subscribers and video equipment sold to telco IPTV, cable and satellite TV providers.

“The cost of encoding and transcoding platforms continues to come down, pressuring video and broadcast equipment revenue as pay-TV providers move to generic hardware platforms and, ultimately, network functions virtualization (NFV) rather than dedicated platforms,” said Jeff Heynen, principal analyst for broadband access and pay TV at Infonetics Research.

Continued Heynen: “This is a long-term shift that will keep video revenue from growing more significantly, despite the fact that pay-TV providers must fundamentally alter their video processing environments to support linear, over-the-top (OTT) and multiscreen content that continues to grow exponentially.”

So with slowing revenue growth in almost all communications sectors it will certainly be a survival of the fittest battle amongst existing telecom/network equipment companies with profit margins under severe pressure.