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Gambling on Telco Returns

Capital Expenditure (CAPEX) & Risk in 6 Countries: France, Germany, Italy, Spain, UK & US

Boston, MA - February 26, 2010 – Traditional telephone companies (Telcos) have lost their monopoly protection and their guaranteed return on investment. A new report from the Strategy Analytics Tariff and Revenue Strategies (TRS) service analyzes how increased competition and lower prices have begun to erode operator margins, increase earnings volatility and make Telcos a riskier investment.

This report, “Gambling on Telco Returns - Not Grandma's Telephone Company,” lays out key changes in the Telecom business across six countries – France, Germany, Italy, Spain, UK and US, describing:
  • Declining Residential Service Revenues
  • Growing Mobile and Broadband demand at lower prices
  • Market Share losses impacting profitability
  • Slower ARPU (Average Revenue Per User) growth threatening revenues
  • Simultaneous investment needs for both Fixed and Mobile Broadband Infrastructure
  • Broadband commodity price cuts which postpone break-even volume

Sue Rudd, Director of the TRS service for Strategy Analytics, notes, “In the US and European telecom industry, monopolies are gone; competition has arrived. Telcos are responding aggressively to these tough challenges - bundling new value-added services with traditional ones and deploying high performance Broadband Infrastructure. But this new competitive world brings significant new risks.”

David Kerr, Senior VP - Global Wireless Practice commented, “There is no lack of market demand for both fixed and mobile broadband services, but lower tariffs and reduced market share could erode traditional operator margins. If investment in Telcos becomes as risky as buying shares of Cable companies and Internet service providers, they may be forced to pay higher interest rates for their Broadband capital investment. Telcos now need to be monitored on an ongoing basis as their risk profiles change.”

This report presents some key indicators for both service provider executives and industry analysts who evaluate the strategic and financial risks of their Telco investments.

    Press release contact

    Sue Rudd
    Phone number: +1 617 614 0709
    Email: Contact me
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