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Thanks to explosive growth in wireless subscriber base, the telecom industry worldwide grew satisfactorily during 2004-2005. Most of the cellular operators registered growth in their ARPU, largely due to a jump in non-voice revenues particularly SMS. The year also saw telecom industry take a sigh of relief, as it came out of a spate of bankruptcies and accounting scandals.

According to Insight Research, the service providers' revenues touched $1.2 trillion during the year 2004-2005. Revenues from the Asia Pacific grew by 9.3 percent followed by Europe, Middle East, and Africa (EMEA) at 4.5 percent. North America witnessed the slowest growth rate at 3.9 percent, but managed to maintain its position as the continent with the largest telecommunication services revenue in 2004-05. One striking thing about the North American services market was that it grew more due to the introduction of new services rather than the subscriber numbers.

Broadband also experienced a spurt with the subscriber base touching 150 million. DSL subscriber based touched 100 million with cable broadband numbers reaching 41 million in 2004. This has been possible largely due to changing regulatory landscape with the incumbents' unbundling their local loop in some countries. Voice continued to remain the main source of revenue despite reduction of long distance tariff.

Battle of standards continued with both GSM and CDMA associations claiming increasing penetration.

Launch of 3G Services
3G services also gathered momentum with its launch by more than 15 operators. Hutchison was very aggressive last year with the maximum number of launches by its 3 Service. The company's main strategy was to wean away high-end subscribers from 2 and 2.5G operators.

The European operators, who had pumped billions of dollars for 3G spectrum licenses, took the lead in launching the next generation services thanks to the adequate support of the 3G-handset vendors. Most of the operators are offering an integrated 2.5 G together with 3G. The launch of 3G got delayed in China due to its decision to go in for a homegrown standard. Elsewhere, operators continued to deploy 3G network.

M&A's Gather Momentum
Consolidation continued all through the year 2004-05. BT acquired Infonet, one of the world's leading providers of international managed voice and data network services for $965 million. The deal is subject to shareholder' approval and regulatory clearances and is expected to complete in the first half of 2005. Shareholders representing 97 percent of Infonet's voting share capital have committed to support the transaction. The acquisition of Infonet is a significant step forward in BT's strategy to address IT and networking services needs of multi-site companies and organisations. It will greatly extend BT's global reach and will deepen its presence in North America and Asia Pacific.

Sprint and Nextel Communications merged to create a $35 billion company. The new entity is called Sprint Nextel. At the time merger, together they had more than 35 million mobile subscribers. The year also saw the acquisition of AT&T Wireless by Cingular Wireless for a whopping $41 billion. The combined entity will have about 46 million subscribers, therefore making it America's largest telecom service provider. This was followed by SBC acquiring AT&T for $16 billion and Verizon taking over MCI for $6.7 billion.

The IP Push
Steep decline in long distance tariff coupled with competitive pressures from new carriers investing in IP forced traditional carriers to speed up their efforts to move towards IP. AT&T decommissioned more than 100 of its circuit-switched platforms and is expected to decommission the same amount by the end of 2005. The idea is to move to multi service switching platforms. MCI, Sprint, and other operators followed suit. Insight puts the VoIP revenues at the end of 2004 at about $100 billion, up from $870 million in 1999. Independent Internet telephony companies such as Skype, Vonage, and others established their position in the market as potential threats to the traditional carriers. Their subscriber base is increasing fast and they have also introduced calls from PC to landline and Mobile phone at a nominal rate. Till March 2005, Skype managed to accumulate more than 38 million users. It claims to add 155,000 new users every day.

Fixed Mobile Convergence
A very important initiative aimed at enabling fixed mobile convergence started in July 2004, with the launch of Fixed Mobile Convergence Alliance (FMCA). FMCA is aimed at bridging the distinctions between fixed and mobile networks and provide customers seamless connectivity which will be a combination of fixed and wireless technologies. FMCA members include BT, Korea Telecom, Rogers Wireless Inc., Brasil Telecom, NTT Com, and Swisscom. More carriers have evinced interest in joining the group for furthering convergence. The alliance also aims to impress upon the equipment vendors to develop infrastructure and access equipment which is based on common standards.

Outlook
According to Deloitte & Touche the mobile and wireless market will overall maintain a positive trajectory in 2005, and by year-end, there will be close to two billion subscribers and several markets will have penetration in excess of 100 percent. Insight predicts that over the next five years, VoP will take an increasing share of the world's telecommunications service revenue, but it will still only represent a small portion of total voice revenue––approximately ten percent. According to Insight, at the end of the forecast period in 2010, Asia Pacific revenues will contribute 32.2 percent of all global telecommunications revenues, while North America's contribution will fall to 29.2 percent, and EMEA will fall to 31.9 percent of all global telecommunications carrier revenue. Overcapacity continues to plague the operators as more than 90 percent of network capacity remains unused.

Sudesh Prasad