The telecommunications industry is experiencing change with the evolution of the mobile industry and growing importance of connectivity for consumers. For companies to manage change and have long-term success, one necessary ingredient is the size of a company’s subscriber base. We look at the importance of having at least 150 million subscribers or subscriber equivalents and a top 2 position in a market.
This number of subscribers is important for a company for several reasons:
- Costs to provide attractive products necessitate a large number of consumers and revenue
- Regulated industry makes it difficult for small players to build sustainable competitive advantages
- Firms that reach this size can more effectively have bundled services to increase value
The success matrix below shows the four categories that a telecom company may be in based on the subscriber base size. In this example below, subscription numbers are based on mobile subscribers. Example companies in each category are also shown.
The largest impact for profitability throughout the top 30 mobile operators relates to the market share in each company’s key market. The split between small and large subscriber bases differentiates the commonly changing (through acquisitions or other changes) companies and organizations that remain in the long term. The continued consolidation in the telecom industry illustrates this point perfectly. Thus, the measure for sustained success relies on both metrics.
While the path for a company to reach high market share is more clear, high market share does not necessarily indicate a large subscription base. So how does a company reach this subscription base? There are 3 ways to build:
- Organic growth
- Expanding to related services
While the chosen path or paths for telecom companies to reach a sustainable long-term subscriber base requires more in depth analysis, these paths provide the ideal starting point for a telecom company to determine how it must be positioned to have sustained competitive advantage.
To understand how to operators can maximize profitability and growth, Canback has its Cellular Operator Analysis Tool (COAT). For more on this, click here.
To see an overview of Canback’s methods and credentials in the telecommunications industry, click here.
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Source: Forbes, Wikipedia, Company annual reports