Telco Services Market Topped $65B in 2007

(Business News & Technology News, 27 Mar 2008)

The telco services market, including product, network, and IT-related service spending, hit $65 billion in 2007, according to the 2007 service business results for network infrastructure vendors from market analyst Ovum. Network equipment providers accounted for approximately 60 percent of that total.

"The importance of services to telecom equipment vendors is hard to overstate," says John Lively, Vice President, Network Infrastructure, at Ovum. "The telco services market is larger, and growing faster than optical networking, switching and routing, and broadband access equipment combined, and it's generating profits. Simply put, services are key to infrastructure vendors' financial success."

Key findings of the study include:

- Worldwide telco services revenues were $65 billion in 2007, up 17 percent versus 2006

- Services revenues were more than 20 percent of total company revenues for top tier network infrastructure vendors as a group

- Average operating margin on services was 13 percent, versus 5 percent for hardware

Lively says the capacity glut of the past several years, combined with the rise of Chinese vendors, with their lower labor costs and relationships with well-funded development banks, have made it difficult for large incumbent NEPs to make money on products. "Meanwhile, service providers are increasingly pulling NEPs into network-related services."

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