Vodafone's announcement that it plans to boost its investments in network upgrade measures to £7 billion ($11.1 billion) may have spooked the UK giant's rivals, but is one of several positive moves in Europe's struggling telecoms markets to have emerged this week. Other positive news came out of France, where both Bouygues Telecom and SFR indicated an improvement in third-quarter results and provided some evidence that their tactics of cutting costs and launching their own low-cost price plans are starting to pay off. Over in Austria, one of Europe's most cutthroat markets, T-Mobile Austria opined that the beginning of the end to the market's price war could be in sight.
At the same time, the latest missive from Moody's served to remind us that Europe is still a very uncertain place for telecoms players. The ratings agency said despite anticipated operating margin stabilisation in 2014, the EMEA telecoms service sector will remain on negative outlook due to the slow pace and uncertain sustainability of the revenue recovery.
Notably, Moody's expects that prices in some of the most competitive markets will continue to drop as incumbents fight to keep their market shares and as improving, but still weak, macroeconomic conditions keep consumers sensitive to prices.
The ratings agency added that integrated incumbent operators such as Deutsche Telekom, Orange, KPN, Telefónica and Portugal Telecom will fare better than companies with just mobile or fixed offerings because they can offer bundled voice and data services. It estimates that the industry's average EBITDA margin will be down approximately 1 per cent in 2013, but will probably stabilise in 2014.
In terms of forecasts for M&A, however, Moody's remained somewhat conservative and predicted that while in-market consolidation deals may be completed in the next 12-18 months, it does not expect a wave of cross-border consolidation.
Enter the bold forecasts by CCS Insight, which not only predicts that 3 UK will buy Telefónica's O2 UK in 2014 but surmises that France Telecom (now Orange) and Deutsche Telekom will merge in 2015.
"After several partnership agreements, the two operators finally agree to a union," the research company says in its annual CCS Insight Predictions. "The move is triggered by the sale of T-Mobile USA to Dish Network as Deutsche Telekom focuses on its European operations."
This move of course assumes that regulators at the European Unions will by then have adopted a more relaxed attitude to M&A.
CCS Insight's view is that this merger would set a precedent for other major mergers in the European telecoms sector to challenge the likes of Verizon and China Mobile on the global stage. Vodafone and AT&T were not mentioned in the predictions, however.
In fact, CCS Insight is predicting a whole wave of M&A in the telecoms and technology sector globally, based on its views of what the next logical steps would be in the industry. "The mobile industry is in a state of constant change, and our predictions have taken into account a vast and growing environment where connectivity is critical," the company concluded.
Watch this space, as the saying goes.--Anne