In the Ovum report released Jan. 22, the firm urged telecom service providers to focus on cost control to offset relatively flat revenue growth over the next five years. “Telcos have the potential to gain greater economies through their global vendors in terms of network rollout, network operations, network optimization, customer experience, and service quality management,” Ovum said in the study.

   The firm believes that service providers are keeping a tight lid on capital expenditures as revenues moderate, but should still spend heavily on technology to meet demands from both their customers and the competition. 

   “Operators are more smartly attacking their operating expense (opex) budgets, which opens new opportunities for vendors,” Ovum Principal Network Infrastructure Analyst Matt Walker said in the report. “However, to take full advantage of this growth opportunity, it’s crucial that vendors have a true understanding of telco opex – something, which until now has been complicated by the lack of granularity and consistency in carrier financial reporting, amongst other barriers”.

   Ovum said a survey operating expenses across all operators revealed that network/IT operations account on average for 18 percent of telco operating costs, of which 60 percent $126 billion is for spending internally, mostly using salaried staff.

   “If you’re an operator, this is a huge cost that needs to be managed,” said Walker. “As operators look to lower operating risks and their cost bases, one option is additional services projects that involve the transfer of employees. However, to meet operators’ needs vendors will have to develop far more complex solutions for carriers than in the past. Carriers need help monetizing their networks and retaining customers, not just deploying the equipment.”

   Walker concluded that while services projects don’t come with guarantees of profitability, there is clearly some upside for vendors as carriers look to outsource more of their operations. “As telcos explore this option, vendors need to be creative and aggressive about winning the business, but should not forget to protect themselves.”

   On the wireless network infrastructure side of the telco industry, research firm Signals and Systems Telecom released a separate report Jan. 22 which claimed that the sector is currently in a phase of transition as mobile network operators seek to address increasing mobile traffic demands amidst global economic uncertainties.

   “This paradigm shift is bringing new challenges and opportunities to infrastructure vendors,” Signals and Systems Telecom said in their report. “In 2011, global 2G , 3G and 4G wireless infrastructure revenues stood at $45.9 billion. We estimate that these revenues will increase 8 percent year-over-year, reaching $49.7 billion by end of 2012, primarily driven by LTE investments. However, between 2012 and 2017, the market is expected to shrink to $48.6 billion.”