The fixed line and mobile communications sectors were the fifth and 12th largest contributors respectively to R&D in the UK850 in 2007
- Three firms – BT (ranked 3rd ), Vodafone (ranked 14 th) and Telefonica O2 (ranked 24th) - were amongst the top 25 R&D investors within the UK850.
- These three companies dominate R&D spend in the UK fixed line and mobile communications sectors: they spent 95% of the sector total, and 7% of the UK850 spend.
- R&D in the fixed line and mobile communications sectors continues to grow more quickly than sales amongst the largest investors.
This summary provides a brief overview of R&D expenditure by companies within the fixed line and mobile communications sectors based on the data which underpin the 2008 R&D Scoreboard. It:
- describes the broad features of R&D in the sector;
- explains the pattern of R&D both in the UK and globally;
- identifies the leading investors in the UK and globally; and
- highlights key trends in R&D spend by the sector.
The fixed line & mobile telecommunications sectors
This summary focuses on those firms classified as part of the fixed line and mobile telecommunications sectors. These sectors are considered together due to their increasing convergence. Firms within the sector sell a mix of services including fixed voice, broadband, mobile, Pay-TV and
IT services.
The sectors are undergoing significant change reflecting the introduction of newcommunication technologies, the impact of the internet, deregulation and emerging markets. Revenues derived from traditional fixed line voice calls are in long-term decline, while demand for voice and data services is shifting to mobile and broadband networks. The sector’s R&D agenda largely reflects these structural forces. R&D is focused on wireless data services, software to facilitate telecommunications networks and upgrading the networks to improve capacity and performance.
The pattern of R&D expenditure
In the UK
Taken together, in 2007, the overall scale of UK R&D in the two sectors was £1,691 million: only firms in the pharmaceuticals & biotechnology sector invested more in R&D.
Table 1: The UK fixed line & mobile telecommunications sectors – key facts
In total, only two firms from the fixed line telecommunications sector were within the UK850 whereas there are seven mobile telecommunications firms. Nevertheless, firms from the fixed line telecommunications sector accounted for 74% of investments in firms in both sectors.
R&D spend is relatively intense in terms of operating profit, sales and per employee. This reflects the relatively large amount of capitalised software development in the R&D which, in turn, reflects the growing importance of IT services business. Telecommunications firms with no or little IT services business tend to have a lower level of R&D intensity.
Globally
In 2007 the fixed line and mobile telecommunications sectors accounted for 2.0% and 0.2% of G1400 R&D spend respectively, and total R&D spend was £6.3 billion.
Globally, the ten largest investors accounted for the vast majority of the total R&D spending in the two sectors. This is consistent with the economics of the sector where scale and scope are critical to the creation of value. Large companies in the sector operate vast communications networks and consequently, to commercially exploit these networks, they invest significantly in R&D.
The major firms
In the UK
R&D spend by firms in the fixed line and mobile telecommunications sectors is dominated by BT which accounted for nearly three quarters of R&D in the two sectors (see Table 2). BT is the third largest investor in the UK. Its R&D spend increasingly reflects the growing importance of its IT services business in its business portfolio. Two mobile companies are also amongst the largest investors in R&D: Vodafone is fourteenth and Telefonica is twentyfourth. Between them, these three firms together with T-Mobile, the third largest mobile investor, accounted for over 99% of both sectors’ investment in R&D.
Table 2: The top five UK investors in R&D in the fixed line & mobile telecommunications sectors
* - foreign owned firm
# - accounts not prepared using IFRS
Globally
No company from either the fixed line or mobile telecommunications sectors was among the 25 largest global investors in R&D.
The largest investors in both the fixed line and mobile telecommunications sectors were UK firms: BT and Vodafone.
Each of the top five companies in terms of R&D spending in the fixed line telecommunications sector in 2007 was from a different large economy. The global top five accounted for just under three quarters of total sector R&D spend (£5.8 billion).
There were only five mobile telecommunications firms within the G1400. All the firms invested significantly less in R&D than firms from the fixed line telecommunications sector.
Table 3: The top five global investors in R&D in the fixed line & mobile telecommunications sectors
# - accounts not prepared using IFRS
Trends in R&D expenditure
In the UK
The two UK fixed line companies in the UK850 grew their sales by 2.5% over the last year and increased their R&D by 18.9%. In contrast, the five mobile communications companies in the UK850 grew their sales by 10.2% whilst their R&D increased by only 2% over the last year.
Globally
Amongst the G1400, R&D expenditure by firms in the fixed line telecommunications sector increased by 15.6 % compared with the previous year and 31.0% over the last four years. The sector’s sales grew by 11.1% over the previous year and 31.6% over the last four years.
The sector remained the eleventh largest in the G1400 in terms of its
R&D expenditure.
R&D expenditure by firms in the mobile telecommunications sector increased by 4.5 % compared with the previous year and 31.4% over the last four years. The sector’s sales grew grew by 11.3% over the previous year and 16.1% over the last four years.
