How did Europe’s top 5 telcos measure up over Q3?

With the quarterlies crazy season over and done with Telecoms.com had a look back over the last couple of weeks to decide who the winners and the losers were out of the European telcos.

Although the telco industry on the whole has been having its challenges in recent years, fortunes have been mixed amongst the big boys. Deutsche Telekom, Vodafone, Telefonica, Orange and BT make up the top five operators in Europe accounting for roughly €61 billion, but what does that mean in terms of individual performances.

Deutsche Telekom

The largest telco in Europe and fifth worldwide has been one of the quickest operators to adapt to the digital era which would appear to be paying off.

2016’s third quarter saw those highly efficient Germans report group revenues of €18 billion, a year-on-year increase of 5.9%. Europe seems to be a tricky market for the industry on the whole, and here DT is no exception. Where DT really saw strides was in the American market, where T-Mobile US demonstrated 17.3% year-on-year growth to €8.2 billion.

Legere may be considered an eccentric character by most in the industry, but he certainly is doing the business for DT. At Telecoms.com, we do often wonder what the Christmas party is like though. How Legere’s banter would be received by the Germans is a funny one to think about occasionally.

In its domestic German market, mobile is proving tricky, but broadband seems to be heading in the right direction. Revenues have been steadily increasing over the course of 2016 with Q3 showing 1.7% year-on-year, and the team plan to connect another 2.7 million households to a fibre-optic line by the end of 2016.

In terms of Europe as a whole, the market suffered a little bit, however DT’s plans to create a centralized Pan-European strategy with a standardized IP-based infrastructure, focused around production sites in Hungary, Poland and Greece could certainly add some efficiency and productivity gains across 2017. Overall it’s been a positive couple of months for DT and it is unsurprising to see them sit at the top of the table.

#winner

Telefónica

The Spanish incumbent has not been having it all its own way in recent times. While seen as one of the more innovative organizations when looking at NFV, SDN and IoT, it’s not having much fun.

The Telefónica has been trying to sell of certain business units as it aims to clear some of the well-publicised debt, which is thought to be in excess of €50 billion. O2 was seemingly deemed excess, but the European Union put the brakes on Three’s attempt to acquire the brand and the team gave up on a €1.2 billion flotation of its cable and mast business unit Telxius due to lack of demand. The debt battle is proving a tricky one.

The last quarter hardly brought smiles and sunshine either, but it has reduced debt to €49.99 billion. Group revenues fell 5.9% year-on-year to €13.08 billion, as while the mobile services revenues stabilised falling handset revenues, driven by longer handset lifecycles, countered any positive moves.

When looking at the specific markets, Brazil grew 7.9% to €2.95 billion, while the rest of South America fell 13.9% to €3.13 billion. The UK dropped 17.1% to €1.68 billion and Germany decreased 5.2% to €1.88 billion. The team’s domestic Spanish market saw revenues of €3.17 billion, another decline of 0.4%.

Let’s call this quarter character building for the Telefónica team…

#loser

BT

A former nationalized monopoly which seems to be talking flak from every corner of the British telco industry of late, but has been pulling in a bit of cash as well.

Revenues were up 35% across the board, but when adjusted for the EE acquisition, it is still a 1.1% increase at just over £6 billion. Not exceptional, but the team did beat analyst expectations of £5.94 billion and still have the best looking man in broadband Gavin Hasselhoff Patterson in charge.

The consumer business demonstrated strong growth, with mobile-phone, broadband and pay-television units boosting 11% year-on-year for the quarter. That said, the British market is becoming very competitive as the race to the bottom is continuing to heat up. Customer service is an area which could make a real difference, and BT is not exactly great in this area. In fairness though, none of the British telcos are really killing it.

The whole sale business, Openreach, also had a good quarter, claiming it achieved 440,000 fibre broadband net additions despite it being the focal point of flak throughout the quarter, with more than 50% coming from external service providers for first time.

Despite name-calling, mud-slinging and general abuse, BT is still the dominant player in the British telco market (by hook or crook) and making cash for investors. Not a bad quarter.

#winner

Vodafone

Where to start with Vodafone. The team struggled through the first half of the year and even had a €5bn net loss which it blamed on a write-down of its Indian arm’s value thanks to increased competition.

Revenues for Q2 stood at €13.6 billion, down from €14.1 billion in 2015 a decrease of roughly 3.5%. The team did not release profits for the Q2, however over the first half of the year the loss was officially €4.702 billion, compared to a profit of €1.115 billion in the first half of 2015. Ouch.

Despite tough conditions in India, the Vodafone has shown some real intent building a $7 billion war chest to take on Indian MNO Jio, which really has been shaking up the market. It looks slightly ominous for the Vodafone business, however with $7 billion to burn, never say never.

At the moment, let’s leave Vodafone to deal with its issues

#loser

Orange

The French telco has had a relatively positive quarter for the most part, with the Spanish, Middle Eastern and African regions putting in a good shift.

The domestic market, which accounts for about 46% of total sales, showed a slight decline, but this is a very familiar story in established European markets. Overall revenues grew by 0.8% in Q3, to €10.3 billion, which was largely well received by the markets as shares increased by 4.5% following the earnings call.

Orange attributed the gains to the success of its Essentials2020 strategy, an initiative focused on delivering high-speed fibre infrastructure. During the Orange Media and Analyst day in London, Deputy CEO Gervais Pellissier said the investments made in fibre technology was beginning to pay off.

There may have been a slight decline in profits for a few quarters, but long-term the business is in a solid position as upgrades will not need to be made in the foreseeable future, a claim which some competitors cannot make as preferences were made towards other technologies such as VDSL and G.Fast. Pellissier believes this is the time for Orange to reposition itself at the top of the telco tree as slow-burning investments pay off.

0.8% is very modest growth for the business, but it is growth none the less. The company is also in a solid position for the fibre-driven future. Not a bad place to be

#winner

What do you think? Do you agree with our wrap-up?