Mobile operators face 'perfect storm' in 2014

Two new reports have served to highlight the growing pressures faced by Europe's operators, with one stating that as much as €100 billion ($136 billion) needs to be cut from costs to return the European telecoms sector to sustainable growth, and the other warning that mobile operators across the globe are facing a "perfect storm" of challenges in 2014, and that Europe's mobile industry has moved "ex-growth".

According to AlixPartners, which published a report on the European telecoms market for the Financial Times, operators have been "paralysed" by the complexity of the challenge in driving substantial operational change in a fiercely competitive market. About 60 per cent of senior telecoms executives interviewed across France, Germany, Italy and the UK said they would like to adopt "radical" cost cutting methods, but two-thirds admitted their company approach to cost reduction had not changed over the past five years.

Meanwhile, a separate report to be published by independent consultancy Real Wireless on Wednesday said mobile operators are facing a "perfect storm' of challenges in 2014, and warned that carriers have yet to grasp the scale of technological and commercial challenges that will start to hit in 2014, with many lacking a strategy to cope.

"We've taken a look at every aspect of the wireless industry, from spectrum to technology, the economics, the locations people are using wireless and the commercial opportunities," said Professor Simon Saunders, director of technology and co-founder of Real Wireless, in a statement. "All included, we've found that mobile operators are facing a perfect storm of challenges starting from this year. The next few years pose an unprecedented challenge, and few operators are preparing for it."

Professor Saunders observed that more capex is needed to support data traffic growth, improve coverage, and build out LTE networks and services, but revenue and ARPU are under strain. "Indeed, in Europe the industry has moved ex-growth," he added.

The Real Wireless study identified challenges including decisions on small cells, the lack of preparation for fifth generation (5G) services and future spectrum demands, the technical nightmare that will result from running 2G, 3G, LTE and 5G technologies at the same time, the growing use of machine-to-machine on 2G networks, and the need to meet the ever increasing demands of consumers.

"What will make 2014 different from any other year is that there are so many big challenges across such a wide range of areas all at the same time," added Professor Saunders. "We're anticipating further consolidation of both networks and operators as demanding consumers and new market entrants put pressure on an industry that is already seeing its growth slow."

For more:
- see this Financial Times article (sub. req.)
- see the Real Wireless report

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