Industries
Communications
MorganFranklin recognizes the challenges facing the communications industry. Recent economic changes have slowed overall commercial account growth and corporate customer spending. Telecom operators also have to balance capital requirements for the foreseeable future with uncertain technological, consumer, credit, and regulatory environments.
Pressures on Pricing
Operators face critical decisions regarding how and where to reduce, streamline, or eliminate base operational costs, particularly those associated with the acquisition and retention of subscribers. Organizational restructuring, the push for new revenue streams largely around content, high customer service expectations and the continued evolution of new products all impact a provider's billing and back office support infrastructure. Keeping infrastructure and processes up to date while consumers demand lower prices can be a challenge. To continue to compete in a price driven market providers must seek more efficient ways to deliver product and services, reduce churn and deliver a profitable services. Now more than ever revenue assurance, credit analysis and low cost delivery is essential.
Convergence (Content and Infrastructure)
A steady convergence of communications technologies and a proliferation of service options are driving the industry's ongoing migration from high-return fixed-line operations to lower-margin mobile and broadband/IP services. Although voice traffic still accounts for a significant portion of the traditional telecoms' revenues, margin pressures are omnipresent given customers' demands for faster services, more bandwidth, and higher security assurances, all at relatively lower per unit prices. The shift from voice to data services and the move to smart phones has also opened up the market for non-traditional providers to offer a host of services and to compete more aggressively. Bundled service offerings from internet brands and media companies are creeping up along the competitive horizon. In addition to network convergence the battle for content and a more rewarding consumer experience remains fierce. Providers must be nimble enough to find opportunities to leverage content and new applications to reduce churn, improve the customer experience and ultimately increase revenues.
The Capital Balance Act
High capital investments are a de facto aspect of the telecom business, and the timing and predictability of the associated returns can be as important as the investment itself. The implicit investment risks and impacts from the capital requirements of new technologies and network infrastructure are only heightened by the ability to accurately forecast the returns on those investments. Uncertain economic times, slower sales cycles, and credit market vulnerabilities add their own pressures to operators. Firms can respond by deferring investment in new technologies and maintenance of existing network infrastructure but they also risk losing a competitive position in the marketplace.
Changes in the Regulatory Environment
Telecom operators must balance capital requirements for the foreseeable future with uncertain technological, consumer and regulatory environments. Unlike other technology areas, regulatory considerations continue to significantly impact the competitive telecom environment, as an operator's ability to anticipate, respond to, and drive regulatory changes will require even greater interdisciplinary interaction and overhead support from the corporate legal, finance, and marketing functions.With the Democratic party winning the presidential election, the majority in the FCC will shift to the Democrats. The commissioners in the FCC could change significantly, since Republican Commissioner Deborah Tate's term will expire at year-end 2008 and Republican Chairman Kevin Martin may leave or be replaced by President-elect Obama. Many expect that the new FCC will be tougher on industry operators and more protective of consumers. The most likely outcome of this type of position would be far more difficult merger reviews along with new reviews of positions on Net Neutrality, the spectrum cap, wireless automatic roaming and home market exemption along with long-coming reform on Universal Service Funding (USF) and inter-carrier compensation. New direction in these areas could have an impact on industry consolidation.
How Can MorganFranklin Help?
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