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Arthur D. Little and Exane BNP Paribas say European telecoms investments are rising to new peaks

Strategy consultants Arthur D. Little in cooperation with Exane BNP Paribas have published the report “Capex – the long march”, the 13th version of their annual report on the European telecoms industry.

This report foresees revenue decline for European telecoms operators (-1.6% 2013-2016e CAGR), with a contraction in mobile and growth in fixed broadband.

Bertrand Grau, Principal in the Paris office of Arthur D. Little: “We believe that despite the planned decline in revenue, telecom capex will continue to rise, driven by new network deployments and fostered by increased competition by cable and mobile leaders. This will drive consolidation of the market.”

The report says that in mobile, there are genuine differences in quality between different networks. So far the companies who have better networks have not been able to reap better prices or market share gains. However, leading operators will still step up their efforts on network quality, and this will put the financial equation of challengers under pressure. This will lead to a regrouping of networks but not necessarily to a decline in competition.

In fixed-line, investment will eventually pay off. Cable operators will continue to extend their lead and it will cost non-cable incumbents more than currently expected to stay in the race.

“Incumbents face another 20% step-up in fixed-line capex over the 10 years, on top of what has already been committed,” added Antoine Pradayrol of Exane BNP Paribas.

Fixed broadband altnets will be caught between a rock and a hard place and the authors also expect to see more consolidation and shifts to wholesale approaches. Overall, the future of networks is the combination of “virtualization” and “patchworks”, to bring benefits in terms of costs and simplicity, but also to facilitate the interface with other networks and players in the ecosystem, and thereby open up new sources of revenue.

This report capitalizes on the analysis of 118 interviews with leading industry players in 24 countries on their views of the challenges in the industry.

For further information, please visit: www.adlittle.com/Exane_2014/

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