Tougher times ahead in 2016

Why 2016 looks set to be a challenging year for telecoms.
Laurent Viviez, partner, A.T. Kearney Middle East.
Laurent Viviez, partner, A.T. Kearney Middle East.

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CommsMEA: What are your feelings for 2016? Do you think it will be a tough business climate for the telecoms sector in the MEA region?

Viviez: 2016 will prove to be a more challenging year for telecoms operators in MEA, with pressure on the top and bottom lines. 

There will be a more challenging economic environment, which is likely to dampen consumer and, quite critically, enterprise and government spending. Growth rates are likely to be quite moderate.

In some countries, the impact of over-the-top players (OTTs), particularly on international call revenues, will also put further pressure on telecoms operators’ growth prospects. In parallel, telecoms operators are likely to face stronger pressure from governments to increase their contribution to national funding (e.g., in the form of increased royalty fees). So, telecoms operators are likely going to face a scissor effect between slow growth and a rising cost base.

CommsMEA: What trends do you expect to see in the coming year, particularly with respect to data usage and traffic?

Viviez: Data usage and traffic is continuing to explode. On the short-term, this will require continued capital expenditures to further re-enforce network capacity and place additional pressure on cash flows.

An important challenge for telecoms operators will be to monetise better this growth in data usage. A.T. Kearney believes that consumer willingness to pay for data is growing and that there is an opportunity to secure better ARPUs from data services.

CommsMEA: What is driving these trends in your opinion?

Viviez: Moreover, growth opportunities in ICT and digital services (in particular digital payments and e-commerce) seem to be gaining steam. They will have a modest impact on 2016 revenues, but certainly provide new growth momentum in the long-term.

CommsMEA: How do you think the MEA region’s telecoms sector compares to the rest of the world? Will this standing change in 2016?

Viviez: Overall, the telecommunications sector in MEA still provides better growth and value creation prospects than other regions, in particular Europe.

However, telecoms operators will really need to accelerate efforts to monetise data services, drive growth from new services and accelerate initiatives to optimse opex and capex.

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