While telecommunications operators in the developed world are most concerned about losing ownership of the client to non-traditional players, this is not likely to be the case in Africa, at least in the short term.
This is according to the 2009 Ernst & Young Telecoms business risk report.
The annual top 10 ranking by leading sector analysts, published in conjunction with strategy consultancy Oxford Analytica, reveals that as non-traditional players, such as internet companies, cable providers and equipment manufacturers have become new partners and competitors, they are challenging for the same clients as traditional telecoms operators. This, in turn, is creating competition that is both intensifying and becoming much more complex.
Julia Lamberth, co-leader of Ernst & Young's Global Telecommunications Center Johannesburg explains that as the African market is still in its high-growth phase, operators are more concerned with increasing their subscriber numbers and securing market share than fending off threats from non-traditional competitors.
"The high cost of data communications has resulted in very low Internet penetration across the continent. The consequence of this is that non-traditional competitors have not been able to establish themselves to the same extent that has happened in the developed world," she says.
She adds that in more mature African markets such as South Africa, Morocco and Egypt, the expected completion of submarine cable systems and the anticipated drop in bandwidth prices may open the door for non-traditional operators to make an impact on the market.
The current slowdown is expected to bring about a certain decline in overall telecoms services, especially for the latest high-tech services. Also, a growing threat is posed in some emerging markets where telecoms operators that provide high-quality services could face increasing competition from companies with new, low-cost business models.
In the current economic conditions, it is unsurprising that efficiency is a priority for mature market operators. Adequately forecasting and measuring returns from technology and infrastructure investments, as well as ensuring that new business models generate sustainable cash flows, become even more critical in this environment.
"Traditional telecoms companies looking to continue their growth plans and move into emerging markets must look at new strategies that reduce costs and maintain a competitive advantage against these new players", comments Vincent de La Bachelerie, global telecommunications leader at Ernst & Young,. "An inability to do so may expose operators to increased risks, particularly when they are even more vulnerable if weakened or distracted by the economic downturn."
"Business risks change with market conditions, so it's important that companies take a strategic view of the risks they are facing and ensure that plans evolve with the current business environment. In volatile times, this discipline is more important than ever," says de La Bachelerie.
The 2009 top 10 telecoms risk rankings are:
* Losing ownership of the client;
* Regulation and compliance;
* Inaccuracy in forecasting returns from technology and infrastructure investments;
* Failure to generate sustainable cash flows from new business models;
* Inability to manage consolidation and mergers and acquisitions;
* Attracting and managing talent and intellectual capital;
* Inappropriate processes and systems to support new business strategies;
* Poorly-managed strategic partnerships;
* Privacy and security risks; and
* Inability to contain and reduce costs.
Other key findings show that regulatory risks gained importance as the adoption of new technologies such as 3G, and the growing interest in entering into emerging markets has brought about new regulatory challenges.
In addition, attracting and managing talent is a new top risk this year. The evolution of new business challenges is requiring a new set of skills that exceed those needed in the past. This challenge is compounded by the strong competition around the world in terms of talent capture and retention and development of intellectual capital. This is particularly important in Africa where operators have identified it as their top internal challenge for 2009.