Mobile network operators will see a 2-3% annual reduction in service revenue growth due to future cuts in mobile termination rates (MTRs), Fitch Ratings predicts.
The research firm notes that European regulators are still keen on implementing more cuts despite previous moves resulting in a 50% reduction in termination fees over the past five years.
It says carriers in Western Europe now derive €0.06 per minute from mobile termination rates, compared to €0.12 in 2005, and that the fees now account for 12-15% of all service revenues generated.
While cuts to the MTR rates in Belgium and Portugal earlier this year show European regulators still have an appetite for rate reductions, the research firm does not expect ongoing reductions to impact cellco’s market ratings, because changes have been implemented gradually meaning carriers can make up the difference with new tariffs.
However the firm estimates ongoing regulator cuts will result in a 10% drop in underlying ebitda from 2005-2013.