Moody's turns negative on EU telcos

Moody’s Investor Services issued a gloomy outlook on European telcos yesterday, predicting declining revenues over the next 12 months as the region’s financial crisis and tough regulation take their toll.
The ratings agency predicts revenues will, at best, grow 2% on average, but is anticipating typical falls of up to 5% through 2012 as tough credit conditions and increasing competition make it unlikely operator’s will grow earnings during the year. The negative rating is Moody’s first on European telcos, which it previously ranked stable.
Carlos Winzer, a senior vice president in Moody's Corporate Finance Group, explains the revenue forecasts “translates into an (unweighted) average revenue decline for the sector of between 1% and 2%.”
Declining consumer confidence is also playing a part in the forecasts, making customers more price sensitive and so heaping more pressure on revenues, Moody’s notes. Operators are also struggling to make further cost savings to offset the pricing pressure, and also face increasing competition from cable TV operators and mobile rivals.
The ratings firm is also gloomy on operator’s ability to cash in on growth services including data, smartphones and pay TV – in particular their ability to offset falling fixed-line voice income with the new services.
Moody’s also predicts operators will have to add €60 billion to Capex budgets over the next three years to meet growing demand for data services.