Jan-Feb 2020 - ChannelVision Magazine

”Telco operators are more vulner- able today than they were 10 years ago,” explained McKinsey in a report. “To thrive through the next economic downturn, they must act now – and with focus.” The report offered a reminder of what happened during the last down- turn, for those who have either forgot- ten or choose not to think about it. “The most recent downturn made for extremely tough operating conditions for telecom operators,” McKinsey explained. “Customers sought to pay less and can- celed contracts more easily in an environ- ment of more intense competition. From 2007 to 2009, many European operators’ average revenue per user (ARPU) dipped by more than 15 percent, and churn rates rose by the same amount for operators in both North America and Europe.” What’s more, McKinsey continued, revenue and margin declines since the 2007-2009 recession have left operators in weaker position to handle a downturn. “Since then, the baseline scenario has worsened,” McKinsey continued. “Telecom performance has significantly lagged behind the market (large listed companies in Europe and North Ameri- ca), particularly in Europe. From 2007 to 2018, North American telecom revenue grew 20 percent, 28 percentage points less than the North American market. In Europe, the picture has been even bleaker, with a 24 percent decline in revenue over the same period compared with market growth of 18 percent.” Primar infrast Source: In How Top Source: Serv Source: Entr I 60 Software servic applicat manage Resilient operators outperformed nonresilient operators during the recovery and widened their lead in the years to follow. Source: CPAnalytics; Capital IQ; McKinsey analysis 2007 Downturn (2007-09) Recovery (2009-11) Growth (2011-18) 130 120 110 100 90 80 70 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 Revenue growth, indexed to 100 (FY2007) +26pp Difference in 2011 +38pp Difference in 2018 Resilients Nonresilients Telco operators 3 1 2 Note: Includes European and North American listed companies with 2007 revenue >$1bn; telco operators with 2007 revenue >$100m. Market calculated as a weighted average (according to average market cap 2007–18) of medians across sectors.Telco calculated as the median within sector. For nonfinancial corporations only. Excludes companies with extreme revenue growth (+300% or -100%) or with extreme EBITDA margins (+100%, -50%). 1 Telco operators within the top 20 percent of the industry by total shareholder returns (TSR) during the most recent recession. 2 Telco operators within the bottom 80 percent of the industry by TSR during the most recent recession. 3 Telco calculated as the median within sector. 4 Percentage point. Percentage of IT Budget vs. Personnel that Support Security Operations Source: Ponemon Institute 40% 35% 30% 25% 20% 15% 10% 5% 0% 36.0% 36.3% 37.1% 11.6% 12.1% 13.0% Percentage of IT personnel that support IT security operations Percentage of IT budget dedicated to IT security activities FY2017 FY2018 FY2019 4 4 CORE COMMUNICATIONS 52 CHANNEL VISION | January - February, 2020