Economic meltdown won't kill telecoms industry: Ovum

Ovum has released a report detailing three scenarios for the telecoms industry in 2009.

In 2009, the telecoms industry will most likely experience a mild slowing of growth and spending in response to the global financial meltdown, according to Ovum.

The message comes from an Ovum report that features several scenarios to help companies plan for the coming year.

The report said the most likely outcome is that the telecoms industry will slow — but not decline.

“At the present time, no one can predict with confidence what 2009 will bring. Scenario planning was made for times like this,” says John Lively, chief forecaster at Ovum.

Three scenarios are set out in the report, based on different revenue growth rates and different levels of capital spending as a percentage of revenue. The scenarios are as follows:

  • Optimistic case: brief slowdown in second half of 2008 with growth rates of revenue and capex returning to 2007 levels in 2009.
  • Most likely case: reduced growth rates in second half of 2008 continuing through 2009.
  • Pessimistic case: declines in wireline revenue and capex, with fixed capex falling 28% — a drastic but not unprecedented decline. A significant slowdown in mobile revenues and no growth in mobile capex between 2008 and 2009.

According to Lively, management is best off making plans for each of the scenarios, rather than basing their entire strategy on just one.

“Management should carefully consider what they would do under each of our different scenarios. Failing to do so in times like these puts your company at great risk.”

Lively wrote the report assuming that the absolute worst-case scenario — defined as a ‘global severe economic depression and an unprecedented crash in the telecoms market’ — will be avoided.

Lively said that fear of the impact of the meltdown could lead enterprises and consumers to reduce their telecoms spend more than necessary. Such an occurrence could filter down to service providers, forcing them to reduce their own capex.

However, Lively said that society’s reliance on telecoms means there’s a limit to how far the telecoms industry will be retarded by the current economic turmoil.

“Telecom has become more a utility than a luxury in most developed countries; and in many developing countries, demand is still driven by the need to increase basic teledensity,” he said.

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