Telecom Market Poised to See Growth Despite Shaky Economy

Technology research firm Gartner, Inc. forecasts 7.6 per cent revenue growth through 2008, with telecom services leading the way.

Growth in the services sector of the telecom market—as well as in the Asia/Pacific region—is expected to push total revenue for this industry to $2 trillion by the end of 2008, representing a 7.6 percent increase relative to 2007’s market size of $1.8 trillion. According to Gartner, the telecom services segment is expected to reach $1.6 trillion this year, up from $1.5 trillion last year. The services segment accounts for 81 percent of the industry. By 2012, Gartner predicts that telecom services will show a compound annual growth rate (CAGR) of 4.4 percent, compared to 8.7 percent for the telecom equipment sector. As a result, the ratio of services revenue to equipment revenue could shrink from 4:1 to 3:1. Will Hahn, research principal at Gartner, says that “four out of every five dollars earned in the sector” comes from services. He continues, “We forecast that this historic proportion will now shrink, an indication that legacy revenue is no longer sufficient for carriers to justify their investments and that the growing equipment sector is being deployed to support new and converged services.” The continued ascent of the mobile segment will also change the telecom market landscape. By 2012, Gartner expects that there will be four mobile connections for every one fixed connection. Revenue for the mobile market could hit $1 trillion by 2010. According to Hahn, “Our breakdown of services clearly shows that fixed voice is in decline, but mobile voice, though currently growing, will also stagnate as a proportion of the market by 2012.” This position seems evident given a recent report by Juniper Research, which puts the number of mobile phone users at 3.6 billion in a global population of 6.6 billion. Geographical change is afoot, as well. While North America has long been the world’s largest telecommunications market, the Asia/Pacific region is likely to grab the top spot this year. For North America, telecom market revenue is forecast to reach $511.6 billion, with Asia growing 8 percent from 2007 to hit $513.1 billion by the end of 2008. The Middle East/Africa region is expected to grow fastest, according to Gartner, at a CAGR of 8.6 percent from 2007 to 2012.