Deloitte TMT predicts 'year of voice' for telecoms


The latest predictions from the Deloitte Technology, Media and Telecommunications Group into the immediate future of the telecoms market paint a cautiously optimistic picture of an industry sustaining itself through more sophisticated marketing of traditional fixed line and mobile voice servic

es while repackaging broadband services to gear up for a broader-based assault on the consumer and business markets.

At the same time more recent developments such as Wi-Fi, 3G and VoIP, will grow well, but not fast enough to be more than niches during 2004.

The group predicts:

 Erosion of fixed line voice market will slow

 Growth in mobile penetration and dominance of voice revenues will continue

 SMS volume growth will tail off

 PCs will no longer be the only broadband drivers as new devices make a splash

 New technologies (Wi-Fi hot spots, 3G, VoIP) will be good niche opportunities.

While the traditional PSTN fixed line market will continue to erode, this will slow due to continuing perceived quality and price advantages. Overall, in developed countries the majority of minutes will still be carried over the fixed network in 2004. Voice will also be sold differently by end of year, beginning to be packaged as part of a bundle of mobile-style communications services.

In the mobile sector, as long as 2G networks predominate, which will certainly be the case throughout 2004, voice will remain as the main revenue platform for mobile operators. This situation will be reinforced by continued growth in mobile subscriptions. In developing countries, demand for basic voice service remains healthy, despite the high costs of service relative to average personal income.

In developed countries, demand will come from markets currently not served, such as the over 55s. An added driver for mobile use will be the fact that by the end of 2004, the majority of handsets being shipped into developed countries will feature highly personalisable colour screens and polyphonic ring-tones.

SMS volumes, which have driven the data end of the market up, will start to plateau in many countries in 2004. Based upon current projections, whilst WAP, internet browsing and MMS will all grow in 2004, their higher usage will not compensate for the anticipated deceleration in SMS growth.

In the broadband arena, continued growth will still not be fast enough to top 10% of population in the top dozen countries around the world. But critically the PC will no longer be alone in driving take-up.

Fresh reinforcements will arrive in the shape of broadband appliances such as games consoles, security devices, dedicated Voice over IP equipment and videophones, which will cause a stir in 2004. In addition, a new family of broadband services will be rolled out tailored to fit different download speeds ranging from 64 kbit/s for the late starter up to 40 Mbit/s.

Other added value services which will remain niche plays in the meantime include WiFi hot spots, which will gradually attract the currently limited number of connected mobile devices, and wireless LANs which will have limited success in non-office enterprise environments such as hospitals and retail spaces. A further round of 3G networks will be launched commercially in 2004, although due to the capital-intensive nature of 3G set-up and the limited potential of 'pull' technologies such as the Mobile Internet, these will only represent a minority of operators.

Voice over IP will begin to blaze a trail to its likely overwhelming success, but only in terms of strategy and marketing rather than major revenue shifts. That said, in 2004 one other country, most likely the United States, will join Japan in boasting over 1 million VoIP subscribers.

'2004 will show that there's a lot more mileage in voice than people thought,' said Richard Knights, partner of the Deloitte TMT Industry Group. 'Overall, the year will see a balance of opportunities for incumbents and innovators alike, but while developing niche plays will stand companies in good stead with new technologies, in a market that does not hold any earth-shattering breakthroughs the emphasis will need to be on better and closer marketing and customer management. Reducing churn and building creative new relationships will drive the bottom line.'

Predictions Methodology

These predictions have been compiled by Deloitte Research on behalf of the Deloitte Technology, Media and Telecommunications Group.

The major inputs used in writing the predictions were: input from the 4,000 strong TMT team around the world; discussions with leading industry and financial analysts; interaction and conversations with clients from the telecommunications and related sectors.

These predictions do not claim to be fully comprehensive, but rather provide a commentary on major industry trends and developments.

About Deloitte's Technology, Media & Telecommunications (TMT) Group

The TMT Group is composed of service professionals who have a wealth of experience serving technology, media and telecommunications companies throughout the world in areas including cable, communications providers, computers and peripherals, entertainment, media and publishing, networking, semiconductors, software, wireless, and related industries.

These specialists understand the challenges that these companies face throughout all stages of their business growth cycle and are committed to helping them succeed. Deloitte is a leader in providing strategic, financial and operational assistance to its technology, media and telecommunications clients.

About Deloitte

Deloitte & Touche LLP is the fastest growing major professional services firm based in 21 UK locations with 10,000 staff nationwide and fee income of 1,228 million in 2002/2003. It is a member firm of the Deloitte Touche Tohmatsu professional services organisation, delivering world class audit, tax, consulting and corporate finance services, employing 120,000 people in over 140 countries.

Deloitte & Touche LLP is authorised and regulated by the Financial Services Authority.

The information contained in this press release is correct at the time of going to press.


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