Our two recently published reports “European Wholesale Market Share 2009–10: The Big Picture” and “European Wholesale Market Share 2009–10: The Detail” present our estimates of the market shares of 24 leading wholesalers based on their latest annual results.
They demonstrate that while voice sales continued their downward slide in carrier’s national and international markets, increases in sales of non-voice services (such as access, backhaul, managed services, content distribution, and hosting) softened the overall effect of the decline, but were not sufficient to fully compensate for it. In European international wholesale markets, diversification away from commodity services almost balanced the fall in voice revenues.
Although European wholesale revenues of the 24 leading market players declined between 2009 and 2010, the 2.1% fall was significantly less than the 3.7% slide in their retail revenues. Hence, these carriers are increasing their dependence on revenues from the wholesale channel after a period in which service commoditization and migration from access resale to LLU have squeezed wholesale revenues.
The wholesale channel presents valuable opportunities for carriers to earn additional revenues. By carrying additional wholesale traffic carriers can improve their economies of scale and returns on investment. Retail business lost to competitors can still bring in revenue by providing wholesale services to retail service providers. The top five wholesalers in the European market earned $26.7 billion from sales of wholesale services in 2010.
Over the years since our first analysis of the size of the European wholesale market, voice revenues have declined from 63% of the total in 2003 to just 42% in 2010. [The] fall is most pronounced in carrier’s national wholesale markets, where sales of voice services have fallen to less than a third of the total. [The decline] is a direct consequence of increased competitive pressure on voice prices and successful diversification of non-voice service portfolios into value-added bundles and solutions.
Only the carriers that diversified their national wholesale portfolios into added-value non-voice services, bundles and solutions, away from dependence on commoditized voice and access services, maintained or even grew their national wholesale revenues between 2009 and 2010. Increased consolidation of international wholesale voice traffic by Belgacom, KPN, and Tata Communications reduced the opportunities for other players to grow this revenue stream. Instead, an increasing number of carriers decided to broaden the range and value of [the] international non-voice services they offer; aiming them at emerging new wholesale customer segments.
Our ongoing analysis of the European wholesale market demonstrates how much and how rapidly it has changed. Players in the market must understand the impact of retail market trends on demand for wholesale services. New types of intermediaries are emerging between carriers and retail customers, and wholesalers must adapt to meet their needs for new services, tailored service bundles, and complete managed solutions.
These new intermediaries, such as content and application providers which seek to offer cloud-based services to their customers, require new services and bundles, with greater ongoing support. Wholesalers should work to understand the requirements of these new intermediaries and increase the flexibility, choice, integration, and potential bundling of services to enable tailored solutions to be assembled to meet their needs.