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Report warns: Operators must act to escape from the low-profit spiral

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The European telecoms industry is at risk of becoming a low profit business. A new study from the management consultancy Arthur D. Little warns that cost management must become an even stronger focus for wireless and wireline operators.

According to the study, EBITDA margins are at risk of dropping from the current figure of 35-40% to 15% within five years due to a proliferation of voice and data bundles and the increasing costs of promotional discounts. Significant investment requirements increase the urgency to save costs further: mobile operators need to invest to cope with mobile data traffic explosion via LTE networks or other means; fixed operators need to further invest into VDSL and FTTB/FTTH networks.

The obvious areas for saving measures have already been targeted by operators, so the challenge now is to identify hidden savings potential through a stringent OPEX/CAPEX analysis.

"Ongoing pressure on revenues, EBITDA and free-cash-flow has triggered an urgent need to save on investment budgets and operating costs beyond the obvious areas. This requires the ability to "think outside of the box", a process Arthur D. Little has managed with many operators," commented Klaus von den Hoff, Global Head of Arthur D. Little's Telecommunication, Information, Media and Electronics (TIME) Practice.

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