European telecoms revenue fall accelerates
The European telecoms industry has seen an accelerated decline in revenues this year, putting at risk spending on crucial next generation network equipment by the largest operators. Telecom service revenue will decrease by close to 3 per cent in 2013 among major European countries, according to Etno, the industry lobby group, reflecting a decline of €7.1bn. Across Europe as a whole Etno estimates that revenues will decrease by 3.7 per cent in 2013, twice the decline in 2012. The European telecoms industry has been hit by a combination of sluggish economic conditions in mature mobile markets and a regulated fall in traditional revenues streams such as roaming charges. As a result, most companies have been forced to cut or suspend dividends in 2013 while they harbour cash to cover balance sheets carrying too much debt. The much anticipated shift to higher speed and higher priced fibre and 4G networks has been slow to boost revenues. But Etno warned that there was a risk that companies would not be able to invest in the next generation of networks needed to carry high-speed internet services given the weak financial performance. In 2012, total capital expenditure across the industry reached €46bn, of which €26bn was invested in fixed networks and €20bn in mobile. The research, conducted by the telecom economics practice at Idate, shows that Europe is still lagging "behind in the investment race . . . with a negative capex growth, compared to strong growth in US and Japan". Etno said that regulation was a central driver of lower investments in Europe. The group is lobbying Brussels industry watchdogs for a more favourable regulatory regime, in particular to allow companies to merge within countries to strengthen their position. However, consumer groups warn that this could have a damaging effect on competition. The industry is waiting for the regulatory verdict on a proposed merger between O2 and E-Plus in Germany, which will be a test case for whether the European authorities will take a more broadly benign view on consolidation. One analyst said this week that the outcome of that decision would dictate the next year of share price movements in the sector. Luigi Gambardella, chairman of Etno, said that the report confirmed the conviction that unless the regulatory environment changes the EU telecoms sector will keep on losing revenue. "Regulation is a game changer when it comes to convincing investors that they should bet on EU telcos. We start seeing positive signals in Brussels and on the markets: the end of the tunnel might be close. It’s fundamental to continue sending the right signals in order to increase confidence in EU markets". The report says that overall service revenues have declined by about €18bn between 2008 and 2012 in the major countries covered by Etno, and by €21bn across the whole of Europe.