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A help line for European telcos
European incumbent telecom operators are struggling to reduce their expenses, but cost cutting alone won’t revive their fortunes. Revenue from voice traffic, which still accounts for 70 to 90 percent of all wireline revenues, is shrinking by up to 9 percent a year for some telcos. Meanwhile, though data volumes have grown rapidly, data revenues have undershot expectations as a result of overcapacity and severe price pressure. If the current revenue situation doesn’t improve, cash flows will inevitably worsen and valuations will come under yet more pressure.
The take-away: Given the competition for voice traffic, the fixed-line voice telephony market won't show meaningful growth. Companies can, however, squeeze more cash out of their fixed-line voice and data services by hanging on to their customers, encouraging their customers to spend more, and launching new services.
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