THE TELCOM SECTOR continues to be a critical force for growth, innovation, and disruption across multiple industries. Perhaps nothing demonstrates this more clearly than the smartphone.
Smartphones have become a hub for much of what we do, directing the activities of virtually all of our connected lives – in both work and personal settings. They are the conduit for both content and a myriad of applications, including videos, music, in-store payments, online commerce, and remote control of our connected homes and vehicles.
Growth in the mobile industry has been dramatic by virtually any measure, and despite some reports of a slowdown, we still expect to see growth in 2017. True, simple innovations such as advanced wearables may take a few years to emerge, and more complex ones, such as fully autonomous vehicles, are farther out. But one thing is undeniable: penetration and use across the ecosystem continues to increase in many key categories.
The growth in smartphone usage signals continuing opportunity for all telecom sub-sectors, including wireless and wireline/broadband carriers, network equipment/infrastructure companies, and device manufacturers. Nevertheless, we expect there could be a change in how these opportunities are manifested. Within the carrier segment, investment in emerging areas has historically focused on “connectivity-first,” which has allowed carriers to leverage their core strengths, including their networks.
However, in 2017 we may see a shift toward areas with a higher growth potential that go well beyond carriers’ core connectivity business. Two potential areas of focus are content and the Internet of Things (IoT).
The long-standing promise of delivering content to any screen is finally becoming a reality, enabled by advances in network technology and higher speeds, as well as enhanced content at the carrier level, whether owned or resold.
The consumer oriented “things” that comprise the IoT – including wearables, connected cars, smart homes, and the government and enterprise-connected “things” such as smart businesses, and smart cities – are likely areas of growth in the coming years. Consumer demand for digital technologies that make it easier to control their homes and cars has grown, and will help to drive revenue in the ecosystem.
Carriers should continue to focus on providing data and voice services that are high quality, reliable, and affordable. The challenge in 2017 will continue to be the focus on capital allocation. Carriers will need to make upgrades to their core connectivity infrastructure, which in the case of the coming shift to fifth generation (5G) mobile networks may run well into the billions of dollars. And, they will also require significant capital resources to fund such areas as the IoT, autonomous vehicles, industry verticals, mergers and acquisitions, and international expansion. Carriers will need both a clearly articulated strategy and an efficient approach to capital spending to maximise their investments.
Beyond operations, though, telecoms will not be able to achieve rapid growth without upgrading their network infrastructures.
Data usage has been increasing dramatically, a trend that is expected to continue in the year ahead. Core connectivity still drives the majority of carriers’ income, and the future of connectivity will remain central to their strategies in 2017. 5G trials and initial market deployment will be a key focus in 2017.
Craig Wigginton is United States vice-chairman and the telecommunications industry leader in the US, globally and for the Americas at Deloitte & Touche LLP.
