TMT sector picking up as recession lifts

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With the Dutch economy on the mend, the TMT sector should see its sales pick up in 2014, ABN AMRO believes. Recovery will not be the same across the sector, however, with publishers, printers and communications agencies likely to continue to contract marginally while television, radio and information technology climb out of the trough.

With the Dutch economy on the mend, the TMT sector should see its sales pick up in 2014, ABN AMRO believes. Recovery will not be the same across the sector, however, with publishers, printers and communications agencies likely to continue to contract marginally while television, radio and information technology climb out of the trough.

The sector as a whole can expect a giant shift in the way private individuals and businesses use their products and services, ABN AMRO warns in its 2014 sector update 'Visie op Technologie, Media en Telecom' which was published today.

Positive outlook for television and radio

After two difficult years, ABN AMRO sees better times ahead television and radio, thanks to economic recovery and to events like the Olympic Winter Games in Sochi and the world football championship in Brazil. Over full 2013, TV advertising revenues dropped by another 3%, but radio advertising revenues turned around in an earlier stage, ending the year over 2% up. ABN AMRO observes that from mid-2013, as economic growth accelerated and companies invested more in the marketing of their brands and products, revenues have improved. This uptrend is projected to continue going forward. ABN AMRO expects streaming video and audio to gain ascendancy. Dutch consumers increasingly prefer to watch and listen using multiple devices. The tablet, in particular, is behind the booming popularity of mobile TV viewing. Another trend with a significant impact on the Dutch TMT sector is the advent in the market of non-Dutch TV companies. This is bound to lead to tougher competition, not only between channels, but also with new content providers. Following the example of Netflix, streaming service providers such as Videoland, Wappzapp and NLZiet are entering the fray.

Telecoms and internet revenues fractionally higher

Telecommunications and internet companies, ABN AMRO reckons, will not benefit from the revival of economic activity. In 2013 these companies earned total revenues of 29.3 billion euros. This was a meagre 1% up on 2012. In ABN AMRO’s view, revenues are merely shifting from one type of service provider to another. Growth of revenues from mobile data and broadband internet is no longer sufficient to make up for the loss of revenues in telephone services. Meanwhile, the increase in data traffic is levelling off due to high prices and the decline of revenues from texting. The broadband market, moreover, is saturated, now that 88% of Dutch households have broadband internet and digital television.

Growing demand for innovative software products

IT services and software generated sales in 2013 of 8.1 billion euros, an increase of 1.5% on the 2012 figure. ABN AMRO attributes this sales growth entirely to software providers, where sales were up 3% in 2013, after a 2.4% rise in 2012. Software is a major growth catalyst for the entire TMT sector. In recent years, software was the tool that crisis-stricken companies used to improve their efficiency and cut their costs. And the importance of software continues to grow day by day owing to digitisation, mobility and the impact of internet. There is a growing need for innovative products such as new platforms and apps.

IT service providers, by contrast, are struggling with a mature market, the transition to new business models and increasing domestic and international competition. ABN AMRO expects growth for this sector to be positive, but only moderately so. "The Dutch economy has emerged from recession. New investments and recovering advertising revenues will greatly benefit the TMT sector. The entire sector, moreover, is facing new challenges such as streaming video and audio. What all these companies need is innovation and entrepreneurial spirit. This will enable them to respond swiftly to new developments,” explains Steven Peters, Sector Banker Technology, Media & Telecoms at ABN AMRO.

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