opinion


European operators first to feel full force of crunch

Just as Telecom Italia announces an extensive cost cutting initiative, industry analysts are warning that European mobile operators will be the first to feel the full impact of the credit crunch.

Research carried out by industry analyst Ovum indicates that while operators in other regions showed little signs of feeling the credit crunch during the third quarter, their European counterparts saw revenue generating prospects shrink.

Last month we reported that the North American mobile market has so far withstood the economic turbulence, helped largely by the rise in two year mobile contracts. While operators in the emerging markets continued to enjoy generous revenue growth rates, with Africa and Latin America carriers reporting double digit revenue growth rates.

“Unlike other regions where the mobile market has proved resilient so far, the third quarter financial results of Europe’s top mobile operators show a marked, credit-crunch-induced deterioration in their performance”, said Emeka Obiodu, senior analyst at Ovum.

However, the good news is that Ovum does not anticipate a major slowdown for the mobile telecoms industry. Although some operators may become vulnerable, the market remains overwhelmingly buoyant and is expected to ride out the financial crises.

“Reassuringly, the basics of the mobile market are still intact,” said Obiodu. “Mobile services have become the de-facto consumer communication tool of choice, and with an increasing shift to postpaid contracts, plus the opportunities enabled by high-speed mobile data services, there is still money out there to be made in the mobile market.”

The research reaffirms similar projections made by telecoms.com parent and industry analyst Informa Telecoms & Media last week.

Analysts advised operators to get their house in order and focus on the customer service experience. The name of the game next year will be retention over acquisition, so carriers should place the highest value customers at the top of their Christmas card list.

So while the reigning in of capex, generally viewed as a last resort measure, will principally be driven by a microscopic focus on stripping out excess operating expenditure and not a blind cost cutting exercise, in terms of opex, Informa expects saving initiatives to focus on advertising and publicity, acquisition and retention costs, discretionary expenses such as travel, training, conferences and consultants, and headcount – where cuts are being already being made.


4 comments

  1. Randy Fuller 04/12/2008 @ 12:53 pm

    Hello,

    When you look under the covers, the only service for mature European operators where revenue is growing more a percent or two is non-SMS data. This is the golden opportunity for them right now. The trickiest part will be managing network growth so that cash income from grows faster than cash outlay via capex. Since broadband apps can get very bandwidth hungry, mobile opcos need to look at their fixed line brotheren and put controls in place today rather than wait and reign in heavy users later.

  2. Michael Karasinski 04/12/2008 @ 10:06 pm

    Building on Randy’s comments, European mobile opcos now need to focus on Network efficiencies both in terms of managing the broadband bandwith at the backend as well as anything that helps them with churn. Some operators have been more focused on growth and the EOS that brings rather than managing costs and efficiencies. It will inevitably lead to some mobile opcco fall out in Europe in 2009. It’s a great time to be looking for European acquisitions if you are from the Middle East.

  3. Rikke Helms 05/12/2008 @ 9:59 am

    If European operators want to stop their revenues from shrinking, they’d do well to consider taking a more serious interest in the enterprise mobility space. At times like these, when organisations are prioritising cost-cutting above everything else, mobility solutions look an increasingly attractive proposition, as they enable companies to achieve more from their existing resources and automate business processes – saving money in the process. Furthermore, because the majority of mobility solutions can be hosted as a service, they’re easy to implement.

    There’s a clear opportunity for operators to use the situation to their advantage by hosting and providing these mobility services in order to generate new revenue streams. Businesses of all sizes want these services, they’re willing to pay for them and they expect their mobile operator to provide them. In the UK, Vodafone has made the earliest moves in this space, but you can bet we’re about to see other operators following suit before long.

  4. Neil Johnson 05/12/2008 @ 6:49 pm

    Not sure who Ovum have asked or what they asked but its 180 degress from what I see in Asia. In talking to Asian mobile operators every week, they report real impacts. For example, in world BPO market #2, the Philippines, operators Globe and Smart revenue hits as a direct result of the crisis in their Q3 published reports. One HK operator I talked to reported 1/3 drop in roaming revenues post-crisis compared to the same month a year earlier. I see most Asian MNOs are cutting batoning down. Attendence at November’s Macau Mobile Congress was low. The # of exhibitors (185) half the previous year. Make no mistake its a global thing.

Leave a comment

Your email address will not be published. Required fields are marked *

You may use these HTML tags and attributes: <a href="" title=""> <abbr title=""> <acronym title=""> <b> <blockquote cite=""> <cite> <code> <del datetime=""> <em> <i> <q cite=""> <strike> <strong>

Polls

Following comments from the European Data Protection Supervisor, do you feel the internet giants are taking advantage of the digital economy?

Loading ... Loading ...