Telcos: Is expansion the answer?

Telecoms players are taking a major risk when expanding services to counter declining revenues, according to one analyst.

As revenue streams for seasoned services such as broadband and mobile decline, telcos are investing in new markets such as media or IT to compensate.

But more than half of new ventures are expected to flop because telcos do not fully understand the business areas they are moving into and what customers want, says Gartner.

Good call...

Check out some of silicon.com's telecoms Cheat Sheets

♦ Fixed-mobile convergence
♦ BT's 21CN
♦ Wireless mesh networking

Martin Gutberlet, Gartner VP, told silicon.com pouring money into new services isn't the only way forward.

He said: "Cost cutting, exploiting your customer base better, investing in customer service and thinking about better services - especially for the business segment - would definitely lead to more and better revenues."

But telecoms companies have already begun to expand into new realms. Once a mere cableco, NTL is now a quad-play provider - offering data, video, fixed and mobile phone service - following its merger with Telewest. BT has also expanded its services from phone to broadband and recently launched IPTV.

Total telecoms service revenues will only rise modestly over the next four years, from $1.3tr in 2006 to $1.5tr in 2010, according to Gartner.