1999 – 2007 eight years of revolution…
The more it changes, the more it’s the same.

 

Between 1999 and 2007 the world’s telecommunications market underwent a number of « revolutions »: liberalisation and deregulation, the democratisation of Internet via narrowband followed by broadband, the Internet bubble and its burst, the takeoff and explosion of cell phones, followed by text messages, sending data via cell phones and UMTS…During these short but noteworthy eight years, the Japanese operator NT&T lost its worldwide leadership to America’s AT&T.

By Nadia El Kadaoui, Yasmine Soufiani and Alexis Christoforou, Analysts

Data used to write this article come from the Quantifica data base www.quantifica.fr

In 1999, the Internet was pretty much a well-kept secret, and market takeoff was still very new. Cell phone use was primarily professional. Eight years later, the world counts some 1.46 billion Internet users and more than 3 billion cell phone clients. Regarding earlier technologies, landline use has dwindled, the telex has disappeared, the fax is being phased out, and networks using X25 packets are now obsolete. These radical upheavals have also somewhat changed the global telco ranking. In 1999, Japan’s NT&T was the world’s leading telecommunications leader…eight years later AT&T has taken over the leadership helm. Behind these two leaders the pack’s ranking has changed little, but shows key differences between European and North American operators.

Table 1: Ranking of the top ten telecommunications groups between 1999 to 2007

Over these eight years, NT&T’s revenues have grown from 83 to 98 billion dollars, showing just 2% growth and leaving the leadership to AT&T. In 1999, two American companies, SBC and AT&T were ranked second and third in the global top ten. In 2007, SBC bought out AT&T and then rebranded the company under the AT&T name. This merger was crowned with the 10% growth, that pushed AT&T to first place. In Europe, Telefonica’s 15% growth and 77 billion in revenues pushed the company to 5th place in the global ranking.
Europe’s loser was Telecom Italia which has lost 4 places and is down to 9th in 2007.

America’s telcos gain ground on their homeland…

Focusing on their highly competitive domestic markets, and bolstered by a series of mergers, American telcos have consequently generated higher revenues over the years.

Combined, AT&T, Verizon and Sprint Nextel currently have a 70% national market share, and their cumulated revenues top more than 252 billion dollars, up sharply from the 1999 figure.

While US expansion focused on national territory, Europe’s operators opened their horizons internationally. Indeed, some European telcos even have operations in the US (Vodafone, T-Mobile), as well as in South America (Telefonica, Telecom Italia), and Asia, regions which were traditionally under American influence.

Table 2: Revenues of key North American telcos between 1999 and 2007(in USD, million)

…compared to their European counterparts with windows onto the world

Excluding British Telecom, European operators are have truly pushed their boundaries. This expansion shows in their higher revenues of 197 billion dollars between 1999 and 2007.

Table 3: Revenues of key European telcos between 1999 and 2007 (in USD, million) 

While Deutsche Telekom remains Europe’s powerhouse, Telecom Italia (of which Telefonica owns 10%), has ceded its second place to Telefonica. France Telecom remains third, and Vodafone has moved up to fourth, posting Europe’s highest growth level of 18%. KPN remains 6th.

Over these last eight years, European telcos have seen their total revenues grow 197 billion dollars, posting average annual growth of 11.1%.

In the overall ranking, the cell phone industry spearheads growth

For the most part, the cell phone industry has spearheaded growth and impacted the international context.

China Mobile’s “great leap forward” in the overall ranking is a case in point.
As stated in Figure 1, the world’s leading cell phone operator counts 369 million subscribers posting 23% growth, versus 191 million for Vodafone. This shows a 92% gap in clients and China Mobile has, nonetheless signed up an extra 23% in its customer base.

Ranked third, Spain’s Telefonica posted a 16% upswing in its cell phone clients for 2007, due to external growth and upbeat markets such as Latin America.

Figure 1: Mobile client base of world’s top ten telecommunications operators (2007) 

Figure 2: Percentage of cell phone revenues compared to total revenues

For the majority of telecoms operators, the cell phone business generates more than 50% of revenues, and more than 75% of their revenues for three of them. Indeed, China Mobile grosses 100% of its revenues via the cell phone industry. Both AT&T and NT&T are well anchored in the wireline industry, as illustrated by the cell phone’s contribution to their overall business: respectively 44 and 32%.