Uncertain future for global telecoms

28 Apr 2015

The global telecoms industry faces an uncertain future, according to a new report published by accountancy and advisory firm BDO.

Intensive competition, financial risks, regulation, cybersecurity and supply chain risks have the potential to disrupt completely what was once regarded as one of the most stable of all industry sectors.

The report, which researched the concerns of 60 of the leading global telecoms companies across 13 different global markets, suggests five areas where there is greatest uncertainty:

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Intensive competition: A majority of telecoms companies (58%) say increased competition is a risk. Many of the companies researched describe clear risk arising from market consolidation. Whilst merged companies benefit from greater brand awareness and a stronger financial position, established competitors face margin pressure as customer prices drop;

Financial: Financial risk is high on the agenda for almost all telecoms companies. Seventy-four percent highlight cash-flow as a risk and more than three-quarters (76%) report access to credit as a risk;

Regulation: New and unfavourable regulation is cited as a risk by over half (55%) of the companies involved in the research. Because regulations vary significantly by geography, it caused global firms problems when implementing consistent growth strategies;

Cyber and data security: Maintaining data privacy is cited as a risk by almost half (48%) of the telecoms companies researched. As the quantity of data held grows, so does the risk. Large quantities of data necessitate the use of outsourcing and cloud computing, but these services are not without risk; and

Supply chain risk: It's not unusual for telecoms companies to have relatively short supply chains that rely on a limited number of suppliers to deliver products or services. This over-dependence was highlighted as a risk in almost half (47%) of the annual reports surveyed.

Christian Goetz, Leader of the Global Telecoms team at BDO, said "Global telecommunications, once regarded as one of the most stable of all industry sectors, has witnessed widespread and disruptive change in recent years. This looks set to continue with an uncertain future ahead for telecom.

"Not all risk is detrimental to a company's future success. Telecoms companies must assess their own appetite for risk and understand that the growing consolidation in the market or new disruptive technologies offer opportunities as well as threats."