A.T. Kearney's Crystal Ball 2012

If it’s not one discontinuity, it’s another. Eurozone headaches, U.S. debt woes, and budget deficits of accelerating magnitudes. However, such man-made turbulence is not new to the tech and telecoms arena—it’s simply business as usual. Welcome to the fourth annual Crystal Ball edition of trends and predictions, both big and small, seasonal and structural. Trends are undeniable and always right, at least eventually. Predictions? Well, we can be a bit more provocative there.

The Undeniable Trends

Data explosion will continue to consume bandwidth and drive up capex budgets, forcing mother telcos to explore deep packet inspection, Wi-Fi offload, and 3G backhaul strategies to eliminate RAN buildout–all this to the benefit of tech providers, which will offer more managed service options to accommodate the economic challenge.

Machine-to-machine is coming of age as a new and true source of incremental revenue for wireless operators. As they deploy innovative ways to manage postpaid retention and increase prepaid penetration, operators will look to M2M as a vibrant release valve for new dollars to help close future EBIT gaps. Some of my clients view this as a top 3 initiative.

Emerging markets finally dominate, and far from where incumbent telcos usually prowl and feed. In 2020, half of the world’s middle class population will come from Asia. Hotels in the African subcontinent are abuzz with M&A discussions by global players who are wary of playing the market-share game in established markets.

Cloud is coming into the sunshine. The market is accelerating in both mass and business markets, but the real question is, Who can deliver? And isn’t the business cloud hype mostly a re-packaging of current network-based solutions, anyway? Isn’t the corporate firewall staying put? Typically, telcos have minimal ICT skills and highly-manual sales and activation processes, so more strategic partnerships between IT service providers and telcos are inevitable.

Death of the desktop. Darwinism is fully evident here. Tablets are the new laptops, which already displaced desktops. Expect some further shape-shifting of profit pools in the office and office suite.

Government-backed broadband. Despite huge budget deficits in most countries, regulators and governments are still intrigued—spurred by the general success of Korea and Japan in stimulating their economies over a multi-decade timeframe via their laser focus on broadband-fueled tech and apps development. Plus, there is now a new generation of public-private broadband build-out “partnerships” in play, such as in France and Australia.

Next-gen analytics. Information is ubiquitous and free, and its transmission is becoming speedier with 4G. The next capitalist trick will be to achieve real-time integration of it all: social networks, purchase data, live feeds, e-commerce specials, location and opt-in features, and so forth to drive better supply-side marketing to address customer needs. Google 2.0, anyone?

The Prickly Predictions

With that industry backdrop, what do we see in 2012:

· Twenty M&A deals, buyouts, joint ventures, or network-sharing deals in Africa

· Three major wireless M&A deals in North America (but not the one you are thinking of)

· RIM/Blackberry becomes part of a larger West Coast-based tech company (three are in contention); Nokia also in play

· Machine-to-machine verticals (healthcare, industrial) prosper and become the latest target for five JVs or alliances by struggling wireless operators looking for the right commercial model

· Apple finally hits the wall (guidance-wise, market share-wise), first in tablets and then in smartphones as operators learn to better market non-Apple (including Apple-free retail stores)

· Top six websites (such as Google, Amazon, Facebook) increase their unique audience share from currently around 50 percent to just over 55 percent; in other words, the strong get stronger (and with the help of Yahoo’s coming recap)

· The first major steps will come toward telco structural separation in some jurisdictions in Asia Pacific and Europe, despite continued general government fiscal pressures

· Stalemate economics dominate in quad play: IPTV hits the wall in deployment and take-up for telcos, and cost-down pressures mount in cable and content businesses, both in the long tail and in the core

· Business-to-business IP-based services take off, as service providers figure out to activate and assure at mass-market process efficiency, end-to-end

· BT Global, Telefonica and AT&T go on a major international acquisition push in the managed services space

· Three new global buying consortiums and joint ventures (2 telco-based, 1 cable company-based) are announced for both direct and indirect purchasing

· Telco stocks rise by more than 20 percent as global investors look for investment safety in high-yield corporates, as round-the-world market volatility continues from Europe to America to China and back to Europe.

Who knows if this will all transpire, but my hit rate for the last 3 Crystal Balls is higher than 50 percent—so pick ‘em. It should be an interesting ride in 2012 amid these global storms.

Crystal Ball 2011

Crystal Ball 2.0: Crazy ideas for 2010

The Crystal Ball for 2009

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Alex Liu (alex.liu@atkearney.com) is a senior partner in the Communications and High Tech practice of A.T. Kearney, a global management consulting firm. He is a frequent contributor to Connected Planet and other business and technology forums.