Telecoms, the G20 summit, and the recession: Three in one

Welcome to my inaugural blog on Telecoms. For readers I don’t know I have worked in the industry for over 20 years, and over the past few years have been interviewed by a wide range of media in connection with market developments in the sector. Here at Forrester I cover Telecoms Strategy and write for Vendor Strategists.

 

What a week this has been with the G20 meeting here in London. As we now know the G20 nations has committed to making $1.1 trillion available for to ease the credit problems of the financial sector; a rejection of protectionism for trade; and a commitment to do whatever is necessary to restore growth to the global economy. Much of the funding for this is to come from  China and Saudi Arabia– a sign that this is a genuinely global solution and not a cozy western club as its predecessor the G8. In this respect UK Prime Minister Gordon Brown is right to talk of a new world order.

 

 

And in the margins around the conference Presidents Obama and Medvedev agreed significant cuts in nuclear missiles for the US and Russia. Chancellor Merkel (Germany) and President Sarkozy(France) rightly pushed for greater regulatory oversight of financial markets. And Mrs. Obama gave a speech to UK schoolgirls every bit as powerful as any given by her husband during his election campaign last year. Some week - and it is still only Friday!

So what does all this mean to the telecoms sector? Much more than meets the eye is the short answer. It is fair to say that so fat the sector has not been hit badly by the recession - so far. Last week the EU reported growth of 1.5% points, a figure consistent with the most recent earnings results posted by the major telecoms operators. So whilst telecoms is not like the manufacturing, construction, or retail sectors it is not immune from the wider recession. In our view we haven’t yet seen the full effects flow through from the sharp downturn that happened in October last year.

 

Whilst the G20 conference was underway 25 of the leading mobile companies – a second new world order - delivered a letter pledging to invest $550 billion in mobile broadband with the potential to create 25 million jobs and so help lift the global economy out of recession.  In return they asked for a more stable regulatory environment and an allocation of new spectrum.  On the one hand you could say this was an attempt to demonstrate how telecoms can stimulate growth, flags up that the sector is still growing ,and has the appetite to continue to invest. There are not too many of these around today.

 

And yet on the other hand it can be said this act is grandstanding and a thinly disguised attempt to extract favorable treatment at a time when world leaders had other weightier things on their minds (how to revive the global financial sector, how to cut nuclear missile stocks). This would be a bit harsh, not least because as this week in London has shown, if the global economy is to pull out of recession then we all need to talk to each other.  This is the real achievement of the G20, and telecoms is, of course,  the means for us all to do so.

 

 

Mike Cansfield, Principal Analyst