2005 Review

2005 review:

2005 was mainly marked by the end of the post telecom bubble period and the return to a more optimistic market view; increased competition and a serious market consolidation. Quarter after quarter, operators and vendors returned to increased profitability, positive cash flow, increased sales, cut costs and debts. So they are now in better position to launch new services and build new networks. With recovering, aggressiveness is also back. This translates in increased competition and lots of M&As.

On the technology side, several news systems were tested and generated strong momentum: Carrier Ethernet is on the verge to be a real movement for operators right now; IPTV is expected to generate new revenues, tested by many operators in 2005 and expected to take off in 2006; IMS has been a keystone in the fixed/ mobile convergence trend and is now one of the main network upgrades, but will only be implemented step by step; 3G is there, with a lot of deployed networks (more than 100 UMTS-based networks), with yet however limited number of subscribers (about 50m) and limited coverage, evolution to HSDPA is likely to be in 2006; WiMAX was also a hot topic, pre-WiMAX and WiMAX 2004 (fixed) were tested, but it is likely that they will have limited deployment as WiMAX 2005 (Mobile) has been specified and could be available end-2006. Broadband access (fixed: ADSL, FTTx, WiFi, UWB, ..or mobile:3G, WiMAX, ..) has been – and will be – the main driver for new value-added services, such as “triple-play” and now “quadruple play”. Other strong moves in 2005 was the debut of low-cost handsets (<$30) for emerging countries, a way to stimulate telephony usage by low-income people, and the camera-phone market taking off in 2005 with more than300m units sold this year.

With healthy markets, vendors have become much more aggressive, leading to strong price pressure on almost every items, the need for (large) vendors to master all network elements or at least to make alliances with partners to offer a complete portfolio (particularly true for IPTV infrastructure with terminals, gateways, middleware,...). Small players have favored partnerships (Entone, Kasenna, , while large players have bought missing technologies to be in the first in the market (Alcatel, Siemens, Cisco,...).
Among a lot of deals, some are meaningful of a clear strategy: Oracle with PeopleSoft, Siebel and Retek; Cisco with Scientific Atlanta, Kiss, Nemo, MI Secure, Topsin, Fineground, Airespace, Protego; Thomson with Cirpak, TBS; Ericsson with Marconi; Alcatel with Native and 2Wire; Sun with StorageTek; IBM with Browstreet, Micromuse and Ascential; Axalto and Gemplus; Adobe with Macromedia; Sagem with SNECMA; and Nortel with Tasman.

On the operator side, competition is both in service offerings and geographical coverage. “Me-too” strategy is relatively common, so the winning strategy is to be first in the market. Secondly, scale is also important, so many operators are investing again in abroad markets. Without being exhaustive in the list, let me give some examples:
Telefonica is buying O2 (UK) and Cesky Telecom); Vodafone bought Telsim (Turkey), Oskar (Czech Rep) and Mobifon (Romania); France Telecom has acquired Amena (Spain); Orascom bought Wind (Italy); Etisalat bought Pakistan Telecom), and many others. Some other deals were purely local for market coverage and new services: the biggest were SBC/ATT, Verizon/MCI, Sprint/Nextel, but also eBay/Skype, Neuf Telecom/Cegetel, AOL/ Google, NTL/Telenet, and many others.