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Strategy Analytics: 5G Capacity Will Drive Down Prices, Not Drive Up Profits

January 7, 2019

BOSTON--(BUSINESS WIRE)--Jan 7, 2019--The 5G wave is real and justified by the supply-side benefits it delivers. However the impact on revenues and margins in converged network competition is less certain and there is potential for disruption. The Strategy Analytics Service Provider Strategies (SPS) report, “Can 5G Slow Operator Profit Erosion?” emphasizes the challenge for 5G in lifting operator performance in a competitive telecoms and media environment where household expenditure and commercial willingness to pay or invest in ICT are flat.

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Telecoms Composite - Top 10 (~$650B Rev.) (Graphic: Business Wire)

Clients to the Service Provider Strategies group can click here for the report.

The report finds the benefits from 5G in terms of capacity and network efficiencies are compelling. The question on the table is whether 5G’s new service attributes will enable new service value propositions that create significant new revenues. Given Strategy Analytics’ analysis of the industry structure in which operators exist, we believe the answer is no.

Harvey Cohen, President and report author comments, “At the core, the issue is whether the technological advantages offered in the transition of networks will overcome or aggravate the industry structure and competitive forces that are inherent in the regulated telecoms industry. Regardless of the technological power of the offering, if the service portfolio is offered without value proposition differentiation, the results will be predictably below average due to the increasing commoditization of the market.”

David Kerr, Vice President notes, “There is no question that the volume of traffic has skyrocketed during the last ten years. However, as operators transformed their networks to video-capable 4G and pushed their fixed broadband towards gigabit speeds, competition drove prices down faster than even the impressive growth in GBs was able to accommodate.”

Phil Kendal l, Director Service Provider Group, adds, “Technology alone will not improve operator financials. Regulatory intent to pass on cost improvements in networks to consumers appears to control the ability for networks to achieve a return on sales of much greater than 6% on a sustained basis. Value creation for operators will come through behavioral segmentation to identify actionable market segments and their needs, improved brand positioning to create differentiated emotional themes that relate to buyer needs and pain points, and a focus on innovative value propositions that are derived from segment-specific requirements and willingness-to-pay.”

About Strategy Analytics Strategy Analytics, Inc. provides the competitive edge with advisory services, consulting and actionable market intelligence for emerging technology, mobile and wireless, digital consumer and automotive electronics companies. With offices in North America, Europe and Asia, Strategy Analytics delivers insights for enterprise success. www.StrategyAnalytics.com

View source version on businesswire.com:https://www.businesswire.com/news/home/20190107005690/en/

CONTACT: US Contacts:

Harvey Cohen, +1 617 614 0705,hcohen@strategyanalytics.com

David Kerr, +1 617 614 0720,dkerr@strategyanalytics.com

European Contact:

Phil Kendall, +44 1908 423620,pkendall@strategyanalytics.com

KEYWORD: UNITED STATES NORTH AMERICA MASSACHUSETTS

INDUSTRY KEYWORD: TECHNOLOGY NETWORKS TELECOMMUNICATIONS MOBILE/WIRELESS

SOURCE: Strategy Analytics, Inc.

Copyright Business Wire 2019.

PUB: 01/07/2019 10:06 AM/DISC: 01/07/2019 10:06 AM

http://www.businesswire.com/news/home/20190107005690/en

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