VoIP will ride out global downturn as Telcos look to ISP and
LT. companies to gain foothold in online telephony, says Grant
Thornton
New research by leading business and financial adviser Grant
Thornton predicts that despite the global downturn, consolidation
in the VoIP (Voice over Internet Protocol) sector will continue
apace as Telcos and IT companies battle for chunks of the expected
£13.5 billion in global revenue VoIP will generate in 2010*.
The research, part of a report by Grant Thornton into VoIP
convergence, predicts that migration from fixed line to mobile and
VoIP services will increase exponentially over the coming years and
result in a raft of consolidation in the sector through 2008,
signalling the death knell of traditional telephony.
Sarika Patel, head of technology at Grant Thornton, cites the
doubling of the VoIP customer subscriber base in 2006 and four fold
in the last two years as just one reason to believe that the VoIP
worldwide customer base with top 250 million in two years**.
"VoIP is no longer next generation telephony, it is here now,
and 2008 should see strategic acquisitions of independent software
developers and ISPs by large Telcos looking to consolidate their
VoIP offerings," says Patel.
Patel says that the past 12 months brought about tremendous
change for VoIP with improving technology solutions and enhanced
ability for ISPs to cater for VoIP calls resulting in the rapid
increase in the uptake in the technology and changes at the heart
of the communication's industry business plans.
Patel: "VoIP has disrupted the traditional value chain in the
communications industry with the focus now falling on IP rather
than traditional voice calls. As such, there is a bitter turf war
taking place in the fragmented market of service provision,
particularly for customer ownership."
She continues, "Incumbent operators are looking for traction in
the VoIP sector and are aiming to offset declines in traditional
voice revenues and retain customers by grabbing a stake in the
software developers heading up the VoIP wave. A surge of M&A
activity in 2007 is testament to this and consolidation with
continue this year, despite tight credit conditions."
Patel believes potential targets for acquisition in 2008 may
include some of the many UK independent residential and enterprise
ISPs and resellers such as Luminson and NDO, Prodigy Networks,
Fast.co.uk, Firefly Internet and Breathe Networks.
"The Telcos will be looking at the smaller players as
acquisition targets in order to develop the business model and IP
necessary to grab a strong foothold in this market. Private equity
will also see plenty of opportunity in this sector. Already,
venture capital has poured in nearly £1bn*** into VoIP and related
businesses in the four years to 2005 and although many thought
funding would dry up over the past two years, VoIP continues to
attract the overtures of the private equity community."
Patel says there are still concerns in the sector which need
immediate action in order to cement VoIP as the next generation of
voice and video communication.
"Security remains a major concern," says Patel. "VoIP is more
secure than it ever was, but eavesdropping, viruses and fraud are
still a threat. Currently, software encryption products are
available, but it is inevitable that encryption will be integrated
directly into VoIP systems in the near future. If this is
successfully managed and brought to market, VoIP will garner the
confidence of business and uptake will jump."
Patel believes other concerns include quality of service issues,
reliability, scalability and the development of sensible industry
regulation. She also believes that once these creases are ironed
out that the next great horizon for VoIP is Internet Protocol
Television (IPTV) as it will allow telecom operators to charge for
a "triple" or "quad-play" package of services.
"Already, IPTV is showing the types of customer numbers that
will have the big operators drooling, for example, BT has already
reported signing up 150,000 subscribers to its BT Vision which was
launched in December 2006****. For that reason, all the major
Telcos are looking to acquire the software developers that will
keep them in the IPTV game, there'll be plenty of bidding action in
this market this year."