The telecommunications sector continues to be a critical force for growth, innovation, and disruption across multiple industries.
While the rollout of 5G will be a multiyear journey, the foundations will begin in 2018. One of the most anticipated mobile technology platforms, 5G will be the connective tissue for the Internet of Things (IoT), autonomous vehicles, and mobile media, just to name a few. In his annual Telecommunications Industry Outlook, Craig Wigginton, Global Telecommunications sector leader, shares his perspective on key developments such as 5G, and answers three key questions.
Where do you see opportunities for growth in 2018?
Revenue growth for carriers is of critical importance in 2018. Revenue yield on data services (revenue per bit consumed) continues to decline as consumers use more and more data, with static or declining monthly bills. Hence it is critical to identify rapid investment opportunities across the telecom portfolio—including 5G, IoT, and cross-industry partnerships (such as mHealth and mPayments), as well as a host of other growth opportunities.
The telecommunications ecosystem expects IoT to become a critical engine for future growth. One of the most successful IoT applications thus far has been the connected car. The largest US carriers have made significant investments in the connected-car space over the last several years, and we are already seeing strong growth in mobile subscriptions for connected vehicles. Connected cars, in addition to other categories of IoT, will continue to be an important growth area for carriers in 2018. (Autonomous vehicles, an evolving area of the connected-car industry, are explored in the “What do you see emerging in the sector?” section of this report.)
The potential for IoT extends far beyond connected cars. These opportunities include the connected consumer and the broader universe of connected things with applications such as connected home monitoring and control, entertainment, wearables, and more. In addition, the connected enterprise market features applications such as connected vehicle fleets, predictive maintenance, factory automation, workforce training and field support, and countless other examples. Each of these will dramatically broaden the reach of wireless for consumers and business users.
Looking beyond IoT, many telecom carriers are looking to potentially enter the media space through M&A deals, partnerships, alliances, and the like. Mobile content and video are some of most significant consumer use cases for 5G, so expansion into the content arena is only natural for carriers seeking growth. We expect this to continue in 2018 through ongoing M&A activity, as well as key partnerships and alliances. While there may be different approaches to media (for example, by buying major media houses, or by purchasing smaller-scale TV distribution technology with the intent to scale it), the objectives are the same: the ability to deliver content to any screen through wireless distribution. M&A in other areas of telecom, such as fiber and towers, is also likely to continue in 2018, building on momentum begun in 2017.
Secondhand smartphones also represent an area of potential growth in the telecommunications industry. With smartphones continuing to increase in value—some having an initial price point of more than $1,000—there is a corresponding rise in the residual value of smartphones, as well as the desired useful life of these devices. As a result, fewer people are “throwing away” their old phones in hopes of finding a second useful life for them. In fact, according to Deloitte’s Global mobile consumer survey, US edition (GMCS), the number of consumers throwing away old phones fell by more than half in just one year—dropping from 12 percent in 2016 to 5 percent in 2017. Hence, there’s an opportunity for carriers and other businesses to capitalize on the growing value of secondhand smartphones, as well as the increasing volume that will enter this channel.
Finally, we would be remiss to not mention augmented and virtual reality (AR1 and VR) as avenues of potential growth. While both are still emerging, according to Deloitte’s GMCS, approximately 10 percent of consumers own a VR headset, representing a relatively quick adaption curve for such a new product. It remains to be seen if this is just another burden on mobile network spectrum and capacity, or a significant revenue growth opportunity for carriers.
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