Ericsson, for instance, has decided that, with a shakeout looming in the mobile-phone business, it would be more efficient to subcontract the job of making its handsets to an Asian producer while it concentrates on making other, more higher-margin, telecoms equipment.Cut, but in the right placesSacking employees is something which many of the tech companies said they would never do.
Group revenues for the full year to December are expected to be on target at $114m, but this has been driven by a stronger performance (thus good news) from the medical division which operates at lower margins than telecoms at this juncture.
Meanwhile the Phone Co-op itself may not necessarily always stick just to the relatively low-margin business of telecoms re-selling.
Both shed solid old businesses and bet on acquisitions in higher-margin, growing sectors (telecoms for GEC, which renamed itself Marconi in the process, and specialty chemicals for ICI).
Special Access fees provide telecoms profit margins of 80percentt as compared to historically being 11.25 percent.
"Telecom margins were a pleasant surprise -- more than doubling from the first quarter," said Charles Park, an analyst at the Samsung Securities Company in Seoul.
Already the margins at traditional telecom operations, like local access and long distance have come under severe pressure.
It begs the question whether it should hang onto its cable divisions and look to them to shore up its shrinking telecom margins instead.
The strongest survivors will be those that find a way to combine the steady revenues of telecoms with the higher margins of media and advertising.
But overarching conditions, like rising unemployment and contracting gross domestic product, will likely continue to eat into profit margins of cyclically sensitive high-end telecoms.
Telecom operator margins are now wafer thin and news reports of profits shrinking to near zero at telecom companies which are feeling the pressure from Jio are common.
