Downturn Slows Telecoms (Except in India & China)

[qi:gigaom_icon_voip] We have long talked about it, and now there are numbers to back it up: The global economic downturn has taken its toll on the telecom business. The entire telecom ecosystem — from broadband providers to equipment sellers — is in a world of a hurt. The fact that many large markets in the western world are reaching a saturation point is only exacerbating the problems for telecoms.

For the first quarter of 2009, the top 20 global service providers posted revenues of $251 billion, down 1 percent from the fourth quarter, reports Telegeography, a telecom research company.

For telecom equipment makers, things were worse: The top 10 equipment makers saw their sequential quarterly revenues decline 15 percent in the first quarter of 2009, to $59 billion. The terrible results of companies such as Alcatel-Lucent, Nortel Networks and Nokia-Siemens are a testament to the effect of the downturn. Even smaller players such as Ciena have been hurting. No such problems for Chinese giant Huawei, however, which keeps growing and growing thanks to its low-cost offerings.

Broadband demand has remained steady: New additions during the first quarter of 2009 came in at 14 million, in line with the fourth quarter of 2008, with China accounting for 30 percent of global growth and the United States being the only country that added more than 1 million subscribers in the quarter.

Even the fast-growing wireless business slowed down: 153 million net new wireless subscribers were added during the quarter, about 10 million fewer than in the fourth quarter of 2008. India and China accounted for 49 percent of the growth in quarterly wireless subs. In other words, major western markets have been slumping pretty badly. “Countries like France, Germany, Italy, Poland, Ukraine and the UK were all essentially flat or even in slight decline,” Telegeography says.

In addition to the global slowdown, Telegeography is rightfully concerned about the impact of saturation in many major markets.

Historic growth in this market has been over 6% but TeleGeography forecasts that growth will decline to an average 3.5% over the next five years. Against this backdrop, the 3% year-on-year revenue growth for the Top 20 service providers can be seen as too sharp a fall, happening too soon. It should also be noted that the 3% growth is bolstered from mergers and acquisitions, and is not just organic growth.

In other words, things might actually be much worse than people think. Now we have seen some signs of a rebound in the second quarter of 2009, but it would be interesting to tally the numbers and see how exactly it’s evolving.

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