This article originally appeared in the August 2010 issue of INTERNET TELEPHONY.
New data from KPMG LLP indicates U.S. communications and media execs are largely upbeat about our sector and its prospects for a continuing recovery this year and into 2011. And those executives surveyed indicated they were investing for growth by a 2 to1 margin.
The audit, tax, and advisory firm, which surveyed 81 CEOs and other C-level suite executives during April and May, says wireless/mobile applications and digital devices are the two areas from which these leaders expect the most revenue growth over the next three years. About 83 percent of the group expects revenue increases from digital devices and services this year. And 46 percent of these executives say that revenue growth should be at least 7 percent.
What’s more, KPMG reports that 65 percent of those surveyed believe revenue and profitability is better now than it was a year ago, although they don’t expect the U.S. economy at large to recover until early 2012. And 75 percent believe both revenue and profitability for our sector will be better yet a year from now.
That may explain why, although the jobs picture generally remains hazy, about 53 percent of this group expects to add to their employee counts this year. On the down side, however 22 percent expect to eliminate some positions.
In other recent upbeat news, Verizon Business (News - Alert) announced that its global wholesale VoIP minutes of use grew more than 200 percent in 2009. The company has a base of more than 700 wholesale VoIP customers.
“Since we launched our VoIP portfolio 10 years ago, we’ve seen steady growth reflecting customer desire for reliable, cost-effective IP voice services,” says Mike Millegan, president of Verizon Global Wholesale. “And, as this market grows, we continue to add new VoIP services while enhancing our existing portfolio.”
To further expand the appeal of its VoIP services, Verizon this year is adding more robust VoIP network interfaces in Europe, support of caller-provided CLI and greater integration into customer portals. (Caller-provided CLI is a caller ID feature that allows a main phone number to appear as the called ID even when a call is made from an extension, branch office, or home-based agent.) And, by the end of the year, wholesale customers outside the U.S. should have the ability to electronically access their call detail records and directly download their monthly invoices.
While executive outlooks, and traffic volumes for video and VoIP, clearly are on the upswing, large-cap mergers and acquisitions have not accelerated at the pace some expected, although (as I noted in my May Top of Mind column) we have seen a smattering of recent M&A action in the communications arena.
PricewaterhouseCoopers Transaction Services (News - Alert) reports that U.S. M&A activity was down 3 percent compared with the same period in 2009. The number of closed deals in the first half of 2010 represents the lowest deal volume this decade, according to PwC. For the first five months of 2010, there were 2,969 closed deals representing $317 billion, compared with 3,065 deals valued at $323 billion in the same period of 2009, the firm reports.
While PwC believes an improvement on this front is unlikely in the near future, prospects for mid-market transactions are good. In fact, the median deal size in the first half was $107 million, indicating that smaller, middle market deals have become the new normal, according to the firm.
“Going into the second half, record dry powder in the private equity space and unprecedented cash levels on the balance sheets of corporate America will combine with the desire of family held businesses and private equity backed management teams to sell prior to looming tax increases,” says Bob Filek, partner with PricewaterhouseCoopers’ (News - Alert) Transaction Services.
The firm expects to see action on this front by software outfits that want to expand their portfolios to better target specific verticals and as major hardware companies move to deliver end-to-end solutions.
Edited by Stefania Viscusi