European carriers forced to shift strategy

The impact of the economic downturn and accompanying shift in consumer behaviour, coupled with intense competition has forced mobile operators across Europe to change their strategies, with many reducing capital expenditure and others introducing discounted pricing models.

However industry analyst Informa Telecoms & Media warned operators this week to be careful that these short term solutions do not restrict growth in the long-term.

Marisol Gomez, research analyst at Informa said the industry has seen a reduction in capex by many of the European carriers, with the total spend in Europe dropping to €6bn in 2Q09 – a year on year decrease of 8.6 per cent. “However, at a time when the operating climate is as competitive as it is, they should really be looking to increase their investment in high-speed network rollouts. The fall in prices and the commoditization of voice services has seen the need for operators to offer new data services, which means there is a very real opportunity to differentiate from their competition and invest in new technologies,“ said Gomez.

Although the overall trend has been to reduce capex, many operators are simply monitoring their costs and looking at alternative strategies to combat the overall decline in revenues and the rise in churn. Informa estimates that total revenues in Europe were €50bn in the second quarter of the year, which represents a year on year decline of 4.7 per cent.

“We have seen the emergence of a number of trends to tackle the decline in revenues, with pricing models very much at the centre of strategic thinking. Cut-price tariffs, SIM-only plans, promotions which benefit the unemployed and bundled offers have been implemented with varying degrees of success, in a bid to win new customers and keep existing ones,” Gomez said.

”With unemployment levels soaring in Spain, operators have resorted to adapting plans aimed at retaining customers through difficult personal times. In highly penetrated markets in Western Europe, many operators have turned to SIM-only plans with impressive success, particularly in the UK, where in 2008 mobile operators sold over 1.2 million SIM-only subscriptions according to Ofcom.”

But in the long-term, the challenging economic environment presents new opportunities to those able to adapt to the climate and those who understand customer needs and behaviour, the analyst believes. At the same time however, the difficult operating conditions can highlight bad management and past commercial flaws.

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