European Austerity Drives Negative Telecom Outlook

Published on:

Note -- this news article is more than a year old.


The impact of austerity measures on European telecoms revenue is the main driver of the negative outlook for the sector in 2013 Fitch Ratings says.

The debt ratings agency now expects much greater pressure in the south than in the north, with a clear divide likely to continue due to GDP contraction in southern Europe. Consolidation in the sector would be a big help in improving profitability in light of the intense level of competition, although the stance of regulators remains uncertain.

Many European operators are bracing themselves for a swath of cuts to their mobile termination rates (MTR) in 2013, with voice and data roaming charges probably next in line for steep reductions. Fitch expects that the hardest hit by the MTR pressures are likely to be southern European operators, including in Italy and Spain, particularly those without large fixed-line franchises.

Dozens of networks operate in Europe compared with just a handful in the US. This significantly reduces economy of scale advantages for European telecoms but also limits their cost-cutting headroom. Fitch expects competition to remain extremely intense because even if in-market mergers do get regulatory approval they are likely to be slow to materialise. Meanwhile, the emergence of cable as a strong facilities-based competitor in many European countries will continue to eat into the incumbents' market shares.

Competition has played into the customers' hands: subscribers are able to renew their contracts on better terms, leading to lower average revenue per user. Incumbents are particularly at risk because their high legacy data tariffs mean that a higher share of their revenue is at risk.

Page Tools


Tags: fitch ratings 

Sign up for our free daily email news alerts

Sample Copy