The increasing drift towards mergers and acquisitions in the telecom industry has resulted in new pressures on telecom operators and service providers. The rising demand for integrated services among consumers has created an opening for new companies that are able to provide additional services and deliver greater value.
As operators place greater emphasis on the issue of convergence, maximizing the potential of their resources and new avenues for the generation of revenue with the proliferation of broadband, perhaps it’s time to take stock of the transformation, taking place in the market.
The year 2005 was dominated by changes in the telecom industry, particularly for wireless and broadband networks. This was largely on account of the needs of mobile operators, who chose to substitute leased lines with more competent systems of their own.
In addition, 2005 saw advances in the development of broadband access, which again opened up fresh prospects for vendors of optical networking equipment. At the same time, broadband access augured well by offering limited scope for the proliferation of DSL lines.
Fresh avenues. Then again, it was in 2005 that service providers began to review new prospects for revenue growth. Many of these operators had made inopportune decisions in the past and settled on ineffective business models. Operators began to concentrate on extending their services in the metropolitan cities. The rapidly expanding requirements with regard to bandwidth stimulated new interest in future planning and careful reinvestment in the mainstay.
However, the climate of competition has recently undergone quite a drastic change. Because service providers are trying to maximize productivity, operators and vendors are easily drawn by competitors who offer attractive prices as well as a choice of products for them to choose from.
New pressures. As a result, although this provides scope for new accounts, it also presents vendors with intensified competition in terms of both products and prices. A case in point is Marconi’s unsuccessful bid for participation in the 21CN project managed by BT.
Another instance is Ericsson’s declaration of its plan to take over Marconi highlights the increasing importance of access to a network offering a variety of services to stimulate expenditure. It also confirmed that Ericsson needed to take action to avert the possibility of being taken over by Huawei.
Climate of consolidation. Intensified rivalry in Europe through 2005 resulted in telecom equipment vendors forging new partnerships with a view to finding an economical way out. And so it seems that despite dismal forecasts, new entrants into the market can still make good by introducing effective solutions and maintaining reasonable pricing.
This is especially so in the case of products such as multiservice provisioning platforms or MSPPs, which call for low capital expenditure because they use carrier class equipment and low priced versions with fixed configurations.
There are vendors such as Alcatel and Lucent seeking partnerships for more specialized products such as metro reconfigurable optical add-drop multiplexers, also known as ROADMs. This may have been prompted by the expectation that the market for these products is likely to pick up.
There were also a number of acquisitions and alliances in the industry, which had varying degrees of impact on the climate of competition. For example, by acquiring Axxessit in July 2005, Ericsson was able to join the ranks of companies such as Nortel, Alcatel, Siemens, Lucent and others in terms of fixed line-mobile single vendor opportunities for convergence. Ericsson was also able to prevent Huawei from upsetting its arrangements for the supply of optical equipment.
The move also allowed Ericsson to take over a small supplier of MSPP, although this situation is not expected to have much of a future, because of various accounts that Ericsson covets for itself.
In the same way, Cisco’s acquisition of Scientific Atlanta provided the company with a major supplier to cable operators and allowed it to enter the market for home entertainment equipment. The move also foiled a golden opportunity for Alcatel to make an entry into the cable multiservice operator or MSO market, which offers great promise.
It appears that although pricing pressures can be eased through vendor consolidation, this is a development that’s going to take time. Although consolidation may make sense in a free market and on a larger scale, this is not necessarily true when looking at short-term prospects for a single competitor.
Weaker competitors are frequently reluctant to back down until they are forced to do so. Investors in such companies are often unwilling to acknowledge mistakes of the past, because they feel that such revelations will adversely affect their prospects of drawing venture capital in the future.
Competitors who are sure of their dominant position in the market have found that making effective choices, offering a high degree of service and support and working efficiently is likely to have a far more lasting impact than simply waiting for consolidation of competitors to work its magic.
The intensified rivalry in the market also brings about an increasing shift towards the trend of globalization. For example, vendors of telecom equipment are striving to become more competitive by investing in areas such as India, China and other countries in the Asia Pacific, as well as Eastern Europe. Their objective is to expand their operational base and establish a foothold in local markets.
Evidence speaks for itself. One such example is the Israeli company ECI, a vendor for networking equipment, which went for global expansion of its R&D operations. Following its acquisition of Eastern Communications, ECI has now set up shop in China and India, apart from Israel and the United States.
Another company that has made good is Alcatel, following its investment in Shanghai Bell. The company has enjoyed a dominant presence in the Chinese market and following Alcatel’s involvement, Shanghai Bell has now been awarded contracts in the Asia Pacific region. One such contract is worth $ 9.3 million for the provision of wireless and opitical equipment as well as broadband solutions to Lao Telecom.
One company that believes in delivering quality service and ensuring that the telecom company’s money is well spent is Glow Networks (www.glownetworks.com).. The company, which was founded by Dr. Jay Srinivasan, is committed to providing effective solutions and follows an aggressive pricing strategy. Glow Networks, which is headquartered in Richardson, Texas, has a presence in India as well as other countries in the Far East. |
