W European fixed operators face turbulent 2009

Fixed-line telecoms services are facing a bleak 2009 and beyond, according to Analysys Mason's new research*. Rapidly saturating broadband means Western Europe is entering a new phase for fixed telecoms. The structural problems it faces are only exacerbated by the current economic downturn.

Fixed telcos face problems in all three of the main retail areas:

"¢ Broadband service revenue is slowing to low single-digit growth and at the same time as the sector needs to invest to differentiate itself from an increasingly mobile internet, funding will be harder to justify. New services may stabilise the average revenue per line, but this is unlikely to grow.

"¢ Legacy voice has been in trouble for years, but the effect of an economic downturn will be to make revenue decline even faster relative to mobile. Unemployment and income squeeze will accelerate households' decisions to give up fixed voice services for good.

"¢ Enterprise telecoms revenue will decline as the economic downturn continues, although the report anticipates that, unlike in the main consumer areas, this will pick up again with an economic upturn.

The report forecasts a CAGR of minus 5.8% for the retail fixed/broadband sector as a whole between 2008 and 2014, compared with minus 3.3% for 2007-2008. In the traditional voice sector the report forecasts that retail revenue will decline by more than 50% over the period.

There aren't many bright spots, but having said that, paradoxically, more wireless services mean some very good network and wholesale service opportunities for fixed operators.

Ultimately, though, fixed operators need to adapt to their gradually changing role in the converged telecoms value chain, and focus their growth plans on monetising those areas of their assets that cannot be substituted: core and metro networks, IT and managed service provision. So as convergence kicks in, we should be hearing less about separate fixed-line operators and more about integrated fixed-line operations.

*Western European fixed telecoms: market sizings and forecasts 2008-2014, click here  for more information

Rupert Wood, principal analyst, Analysys Mason

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