Telecom operators: Surviving and thriving through the next downturn: McKinsey

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Telecom operators: Surviving and thriving through the next downturn
Most Popular Insights
Operators today are in a worse position to withstand a downturn
Lessons from the past
Pre-downturn: Reinforce the core
During the downturn: Be nimble and protect key investments
Post-downturn: Invest for growth

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The most recent downturn made for extremely tough operating conditions for telecom operators.
Sidebar About the research We analyzed the actions of telecom operators before, during, and after the downturn of 2007–09 by first selecting the appropriate company set.
To understand what operators can and should do to prepare for the next downturn, we studied what resilient operators in North America and Europe—those in the top quintile of the industry by total shareholder returns (TSR) and economic profit during the most recent recession—did differently (see sidebar, “About the research”).
Our research has revealed that, at each point in the cycle (pre-downturn, during the downturn, and post-downturn), a set of focused, high-impact actions, undertaken in the right sequence, has historically helped operators steer toward outperformance.
Telecom executive teams must plan now for the next downturn to build resilience and safeguard their company’s outlook and growth.
Key elements of the business model are the same today as they were before the most recent downturn, in which resilient operators (“resilients”) significantly outperformed the rest of the industry (“nonresilients”) as well as the market overall.
Resilients increased revenues 27 percent more than nonresilients during the downturn.
In the most recent downturn, resilient operators took a number of proactive actions that can prove instructive.
Resilient operators managed to keep up investments through the most recent downturn while nonresilient operators pulled back on such investments.
Amid the downturn, resilient operators focused on efficiency and being nimble, reacting quickly to market opportunities and threats to their core business, reducing costs, and optimizing capital.
The telco reduced operating costs by 5 percent in the first three quarters of 2009 and was able to maintain profits on par with 2007 throughout the downturn despite significant revenue decline

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