News Stay informed about the latest enterprise technology news and product updates.

Telecom strategies for surviving a down economy

With sound strategies, carriers can come out on top, even in the economic downturn.

Careful planning can help telecoms survive – and grow market share – during the downturn.

The risks of the downturn are tremendous. Just as carriers struggle to redefine their revenue streams, tough economic times threaten to accelerate the negative trends in consumer spending that have hurt ARPU.

The key, analysts say, is to have a good plan in place -- and maybe more than one.

"Service providers are now being forced to operate in conditions where they never, ever wanted to operate -- where their risk level rises," said Tom Nolle, president of CIMI Corp.

Much of the danger, Nolle said, comes from the fact that many of the revenue streams that service providers hoped to use to replace lost voice minutes -- mobile video, for example, or on-demand services -- have never been marketed during a recession. No one knows whether consumers will see these services as discretionary products they can do without.

And while operators are unsure how some of their future-looking services will fare, tough economic times might be what it takes to get vendors to start producing products that truly drive revenue for carriers.

"If you feel pain, make sure your suppliers feel it," Nolle said. "You've got to focus on supplier strategies that are going to help you monetize."

Nolle said telecoms need to tell vendors the parameters of the solution they want and then demand a way to enable that solution for their own customers, pushing ahead with paths toward monetization that have been stymied for years.

The tough times could also be a golden opportunity to grab market share.

In tough times, consumers are not going to ditch services, Nolle said, but they would be willing to switch them for a better deal.

"There's a real threat of a protracted downturn," he said, "and then the service providers … are willing to trade a little price for market share."

Companies willing and able to make that sacrifice will see a payoff of a stronger customer base when the economy rebounds and consumer spending returns.

"Even if the revenues are flatter, you can still end up in a better position [with regard to market share]," as long as companies keep a level head and a strategy grounded in reality, said John Lively, vice president of telecom consultancy Ovum.

Embracing possible scenarios

The key, analysts say, is to have a good plan in place -- and maybe more than one.

"I think it's really important to remind people of scenario planning, and it's really something people should be looking at right now," Lively said. "Right now, being realistic means admitting no one really knows how next year will turn out."

Lively recently wrote a report recommending that operators plot out three broad scenarios to aid in planning:

  • Optimistic case: brief slowdown in the 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.

"The best operators have been doing this all along as a matter of course," Lively said. "Those are obviously the ones that, if they have a good strategic planning process, were in a better position to see this coming."

"People are not going to give up their phones or stop using their TVs, no matter how bad things get," he said. "Our industry's been around for a long time, and we're central to the operation of the modern world."

"The worst thing anybody could do is resort to evangelical forecasting, where the CEO says we need to grow by 5% next year," Lively said. "All the plans assume it, but it may be absolutely impossible, and that kind of forecast or evangelical planning in this environment can drive a company off a cliff."

Dig Deeper on Telecommunication networking

Start the conversation

Send me notifications when other members comment.

Please create a username to comment.