idc impact of the global economic crisis

8/8/2019 IDC Impact of the Global Economic Crisis

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Copyright 2009 IDC. Reproduction is forbidden unless authorized. All rights reserved.

The Impact of the Global Economic Crisis

on Western European Telecoms Spending

Eric Owen, GVP EMEA Telecoms and Networking

Marta Muoz Mndez-Villamil, Research Director,European Consumer Telecoms

May 12, 2009


2/23


3/23

10/02/10 3 2009 IDC

AgendaAgenda

Review of overall market for connectivity services in WesternEurope

Focus on consumer sector

Focus on business user sector


4/23

10/02/10 4 2009 IDC

Connections/subscriptionsConnections/subscriptions

0

100

200

300

400

500

600

700

800

900

2008 2009 2010 2011 2012 2013

Millions

Dedicated

Mobile

Dial

Broadband

Source: IDC European Telecom Services Database, 1Q09

Overall CAGR over theperiod is 0% with marketdeclining from 2012

Total connections is 800million in 2008 whichrepresents just over 2

connections per head ofpopulation

Mobile subscriptionsrepresented 62% of totalconnections in 2008 increasing to 66% by

2013

IDC estimates thatbroadband connectionswill surpass dial in 2014

Total Telecoms Services Connections

by Type in Western Europe

CAGR

2%

5%

-7%

-9%


5/23

10/02/10 5 2009 IDC

Voice TrafficVoice Traffic

0

200

400

600

800

1000

1200

1400

1600

1800

2008 2009 2010 2011 2012 2013

Billionso

fMinutes

Mobile

IP VoiceFixed Voice


Overall CAGR overthe period is -1%, withmarket decliningslowly every year

Monthly traffic perconnection is

approximately 100minutes for mobileand 320 minutes forfixed voice

IDC estimatesindicate that fixed

voice and IP voicetraffic levels will bethe same in 2014

Total Voice Traffic


CAGR

17%

-11%

4%

51%

29%

23%

10%

48%39%


6/23

10/02/10 6 2009 IDC

User SpendingUser Spending

0

50

100

150200

250

300

350

400

2008 2009 2010 2011 2012 2013

$Billion

Mobile Voice

Mobile Data

IP VoiceFixed Voice

Fixed Data


Overall CAGR overthe period is -1%, withmarket declining alittle every year

Voice servicesrepresent 68% of

spending in 2008,reducing to 62% by2013

Mobile servicesgenerated 48% ofspending in 2008

increasing to 52% by2013

West Europe the onlyregion in the worldwith declining market

Total Telecoms Services Spending


CAGR

19%

1%

-8%

-1%

6%


7/2310/02/10 7 2009 IDC

Consumer

62%

Small

Business

17%

Medium

Business

6%

Large

Business

15%

Rest of WE

11%

Benelux

7%

Nordics

6%

France

16%

Germany

18%

Italy

14%

Spain11%

UK

17%

User SpendingUser Spending


by Type of User in Western Europe


by Geography in Western Europe

Top 5 countries represent over75% of total spending onconnectivity services

Consumer share will increase alittle over the next two years dueto impact of the economicsituation on the business sector



8/2310/02/10 8 2009 IDC

IDC Telecom VisionIDC Telecom Vision

Telecom operators and network providers have to expand into related and

new markets to capture growth revenue streams

This strategic move has beentaking place for a few years

and is not driven by economicslowdown

This requires transformation bythe telcos, services need to be

Simpler

More accessible

Easier

Revenue

Telecom Market

2000 2015

Data center & Hosting

Media & Advertising

Consumer Electronics

ICT & Managed Services

Software-as-a-service

UC & Collaboration

IPTV


9/23Copyright 2009 IDC. Reproduction is forbidden unless authorized. All rights reserved.

European Consumer TrendsMarta Muoz Mndez-Villamil


10/2310/02/10 10 2009 IDC

European Consumer Trends AccessEuropean Consumer Trends Access

Consumer Revenues by Access

Type

0

50,000

100,000

150,000

200,000

250,000

2008 2009 2010 2011 2012 2013

($Millions)

Fixed and broadband Mobile voice

Pure access revenues to decline by

4% CAGR between 2008/2013

Mobile voice revenues represent

over 55% of total access revenues

The increase in broadband access

revenues (3% CAGR) does not

compensate for the decline in

traditional fixed-line revenues (-9%

CAGR) during this period

The largest decline in traditional

fixed-line revenues is to come from

total call spend rather than line

access spend

Source: IDC, European Telecoms Database, 1Q 2009


11/2310/02/10 11 2009 IDC

Unlimitedvoice call plans showing some signs of success

Larger allowances over time To retain customers and as part of a bundle

To encourage traffic

Move to stable ARPM Customers not using the entire allowance

Fixed-broadband bundles increase fixed traffic Validity as a tool to fight fixed-line loss and traditional revenue

decline in the long-term questioned

Household broadband penetration expected to increase from51% in 2008 to 62% in 2013

Growth in broadband access allows for some good news

European Consumer Trends AccessEuropean Consumer Trends Access


12/2310/02/10 12 2009 IDC

European Consumer Trends ContentEuropean Consumer Trends Content

Consumer content revenues to increase

by 24% CAGR However, content only represents a

small part of the total revenue to SPs.

Comparatively in 2012 contentrevenues are not even of the

access revenues Demand for consumer VoIP services

almost exclusively price driven, butbroadband penetration is a driver.

Heavy users of international

voice minutes Digital music (fixed and mobile) to

become fast growing type of content.

Access model will becomeincreasingly important

Source:/Notes:

Euroepan Consumer Revenues by

Content Type

0

5,000

10,000

15,000

20,000

25,000

2007 2008 2009 2010 2011 2012

($Millions)

VoIP Music Games Video

Source: IDC, European Consumer Communications and Multimedia Database, 4Q 2008

Note: Includes fixed and mobile content. Video includes video delivered to a PC only,

not to a TV set.


13/2310/02/10 13 2009 IDC

European Consumer Trends DTVEuropean Consumer Trends DTV

Digital TV revenues reached over $23bn in 2007

and are set to grow to $37.5bn in 2012 (CAGR10%)

Growth rate drops in 2008 and 2009 as aconsequence of slower analogue to digital migration

Digital packages tend to be more expensivethan analogue ones

Higher proportion of customers choose freeto air DTT or satellite services

Despite crisis, VoD spending is expected togrow considerably as subscribers grow andcatalogues increase. Increasing time indoorsmeans partial disposable income relocationto indoor activities.

Mobile TV (CAGR 70%) and IPTV (CAGR 37%)the two fastest growing platforms, although in

total they only account for 21% of total digital TVconsumer revenues in 2012.

By platform, satellite remains the largestcomponent of revenues ($15bn in 2007 vs $17bnin 2012). Its share, however, will decrease fromnearly 70% of total digital TV revenues to 45% in2012.

Digital TV Revenues

0

5,000

10,000

15,000

20,000

25,000

30,000

35,000

40,000

2007 2008 2009 2010 2011 20

($Million

s)

Digital Terrestrial Satellite Cable IPTV Mobile TV

Source: IDC, European Consumer Communications and Multimedia Database, 4Q2008

Note: Includes VoD. Only includes TV services to a TV set (mobile handsets

included)


14/2310/02/10 14 2009 IDC

European Consumer Trends Total MarketEuropean Consumer Trends Total Market

European Consumer Revenues

0

50,000

100,000

150,000

200,000

250,000

300,000

200

8

200

9

201

0

2011

2012

($Mil

lions)

Access revenues Content revenues

Digital TV revenues Mobile data revenues

Medium-term recovery and therole of mobile data

Retention, retention, retention

Saturation leads toretention

Increasing importance of digitalcontent

Differentiator

Retention

Revenue source More but different bundling

Content, mobile, mobilebroadband, devicesSource: IDC Telecoms Database 1Q 2009 and IDC Consumer

Communications and Multimedia Database, 4Q 2008


15/23Copyright 2009 IDC. Reproduction is forbidden unless authorized. All rights reserved.

European Business Trends


16/2310/02/10 16 2009 IDC

Challenges for ICT ManagersChallenges for ICT Managers

Do more with less in some cases, much less.

Price benchmarking, and matching cheapest offer in-house.

Managing simultaneous transitions to next-gen converged networks,to next-gen Web apps, to VoIP/UC, to cloud.

Twin priorities of managing performance and security pulling inopposite directions.

Caught between CEO (short-term tactical demands for shareholderbenefit; medium-term strategic roadmap), CFO (cost reduction, budgetsqueeze, asset/resource allocation) and end users (security, support,

unsupported devices/apps, new app demands). Usually at odds witheach other.

Responsibilities keep broadening as facilities/services not seen by theIT department before become nodes on the network: phone handsets,PBXs, building security/automation systems, sensor networks, RFID.


17/2310/02/10 17 2009 IDC

IP VoiceIP Voice

We have revised our business VoIP forecasts to take into account new information

available from service providers. Most countries show a slowdown in the uptake of business VoIP services as a result

of the economic recession. Our forecast contemplates an improvement at the end of2010. We expect strong "catching-up" trends towards the end of the forecast period.

The balance between CPE-based and hosted VoIP market has been revised.

Traffic mix off-net vs. on-net for the CPE-based VoIP market (IP/TDM trunking andIP voice over VPN) has been adjusted as companies have put on halt or slowedVoIP expansion plans to other sites within their organization.

The number of VoBB connections has been modestly reduced compared to theprevious forecast. The key reason is that availability, marketing push andpenetration developed slower than expected in 2008 in a number of countries. IDCremains upbeat about the growth potential of VoBB services. A growing number ofcustomers, especially in the SMB segments, will choose a cost-effective VoBBsolution on top of their broadband connection, while operators will become moreaggressive in marketing these products.


18/2310/02/10 18 2009 IDC

Broadband and MobileBroadband and Mobile

Broadband Services

Forecast lowered slightly due to impact of the economy and mobile broadbandsolutions.

The outlook has been further impacted by a reduced forecast of the number ofteleworkers which in turn impacts business broadband projections.

Mobile Services

The business mobile numbers have been updated in 1Q09 to reflect the currenteconomic and financial downturn.

The impact of companies going out of business, merging and reducing overalllevels of employment will show a reduction in enterprise usage of all services. Weforecast that mobility will be impacted with a reduction in business paid mobile

contracts. Also as mobile spend will now be considered more in line with othercorporate spending as opposed to be left as a local, office administration orindividually billed back expense, we forecast a steeper decrease in the numbers ofnon-formalized connections and revenues.

However, the growth in mobile broadband will continue to provide strong growthover the forecast period.


19/2310/02/10 19 2009 IDC

WE Business Data Services OverviewWE Business Data Services Overview

2,384 1,889 1,479 1,134 851 624

3,6403,142

2,6862,271

1,9041,582

10,86211,204

11,76712,351

12,955 13,582

1,6122,005 2,469 3,007

3,6174,295

0

5,000

10,000

15,000

20,000

25,000

2008 2009 2010 2011 2012 2013

($M)

Ethernet

IP VPN

Digital leased lines

Frame/ATM

CAGR 2008-13 = 1.7%

IDC expects the overall business data network

services market will dip 1.4% in 2009 and return toshallow growth in 2010

The economic situation is hitting capital-intensivenetwork projects and some in-house managed,CPE-based networking.

Conversely, managed services are holding up orare being accelerated by the crisis: an increase in

companies moving to recurring fee-basedservices, moving assets off the balance sheet,and rationalising IT/network resources.


Business Data Services Spending

by Type of Service in Western Europe


20/2310/02/10 20 2009 IDC

IP VPN ServicesIP VPN Services

1,533 1,416 1,358 1,323 1,310 1,305

9,328 9,78710,409 11,028

11,645 12,261

0

2,000

4,000

6,000

8,000

10,000

12,000

14,000

16,000

2008 2009 2010 2011 2012 2013

($M)

Network-based

CPE-based

CAGR 2008-13 = 4.6%

IP VPN market remains dominated by MPLS-basedservices, which continue to grow in revenue terms.

New IP VPN business is increasingly coming fromexisting customers as the peak of migration fromframe to IP has passed.

Managed CPE-based IP VPN services continue togive way to MPLS services but remain a sizableniche for companies with many small or remotesites, major sites/plants in remote locations, etc.

DIY networks (the IT department buys andmanages CPE to construct a VPN over the publicInternet) remain widespread but are declining ascompanies primary networks.


IP VPN Service Spending by

Type of Service in Western Europe


21/2310/02/10 21 2009 IDC

Carrier Ethernet ServicesCarrier Ethernet Services

99 145 205 283388 524

1,513

1,860

2,265

2,724

3,229

3,771

0

1,000

2,000

3,000

4,000

5,000

2008 2009 2010 2011 2012 2013

($M)

E-Line

E-LAN

CAGR 2008-13 = 21.7%

Carrier Ethernet remains the hot growtharea of data services.

Ethernet provides low-cost high bandwidthto support large-scale consolidation andhigh-capacity applications:

Network migration

High-bandwidth apps

Datacenter consolidation

Price/performance (cost per Mbps)

Transparent LAN

For some, preserve IP routing in-house


Carrier Ethernet Services Spending

by Type of Service in Western Europe


22/2310/02/10 22 2009 IDC

Recent business user survey suggests that use of Ethernet services

will grow in 2009 at the expense of all other alternatives

Current and Planned Ethernet AdoptionCurrent and Planned Ethernet Adoption

16%20%

24%29%

40%47%

72%

X.25

Carri

erEth

erne

tAT

M

Fram

ere

lay

Priva

telin

e

Man

aged

IPVPN

Self-

man

aged

IPVPN -6%

18%

-3%-2%

-4% -2% -4%

X.25

Carri

erEth

erne

tAT

M

Fram

ere

lay

Priva

telin

e

Man

aged

IPVPN

Self-

man

aged

IPVPN

% of companies using each service

in 2008

% change in no. of companies

over next year

n=672Source: European WAN Manager Survey, 2008

Data Services (IDC #HP08Q, January 2009)


23/23

Eric Owen

[email protected]

+44 208 9877124

Marta Muoz Mndez-Villamil

[email protected]

+44 208 9877148

Thank YouThank You
mailto:[email protected]:[email protected]:[email protected]:[email protected]:[email protected]:[email protected]:[email protected]

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