When telephones moved off the desk and into the handbag, the mobile revolution offered licences to print money.
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Last Updated: May 10, 2011
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Investors in the industry enjoyed stellar growth in subscriber numbers from markets where profits were protected by regulators. Even after the threat from unregulated communications on the internet had reared its head, telecommunications companies prolonged their comfortable existence by replicating old business models in new markets such as the Middle East region.
Today those companies would like us to believe there is a similar opportunity for fat profits in the broadband revolution - but investors are sceptical. After the global economic recovery, telecoms companies have been left with the lowest cash-flow valuations of any industrial sector and bankers do not see telecoms reaping outsized profits. Investors expect global brands such as Skype, Google, Facebook and Microsoft to unlock the value from this broadband revolution, leaving telecoms companies behind.
Lumbered with the costs of installing new fibre-optic networks and limited by national boundaries, telecoms companies risk relegating themselves to a servile role to the internet brands in their quest for global dominance.
Telecoms executives across the globe are now being forced to look where their true value lies.
Bankers question whether they really need to own the cables, switches and licences, or recast themselves as service providers.
The challenge for telecoms companies is to cut the costs of "the factory" and strengthen their brands. Financiers holding the purse strings want to see more operational efficiency even if this means sharing resources.
Mobile companies must get smart with their user relationships, combining with innovations from the media sector to monetise content and enhance brand identity.
