In most markets, mobile telephony and broadband remain the drivers fuelling the more positive outlook in Europe’s telecom landscape. This was reflected in the massive investments during 2006 in ADSL2+ and fibre roll-outs, and in new mobile technologies such as HSDPA, which is commercially available in 24 of the 27 EU countries. Consumer-driven content and further refinement in business models focussed on fixed-cost mobile broadband plans are likely winners in coming years. Other key developments expected in 2007 include the further progress towards Next Generation Networks (NGN), moving infrastructure to an IP packet-based, full service typology. The principal innovators in this sector - British Telecom, KPN, France Telcom and Deutsche Telekom - have set the pace and will alter the face of the industry by the end of the decade. In addition, many of the major players having consolidated businesses to strengthen their positions in the face of increased competition will begin to launch additional services (such as Vodafone with broadband), capitalising on growth areas in other sectors and further contributing to the convergence of technologies.
Germany
Germany has Europe’s largest population and largest telecom market, worth an estimated €69 billion in 2006. Much of this revenue has been generated by alternative operators as they continue to slice away at the market share of a struggling Deutsche Telekom: the number of fixed telephony customers served by alternative operators reached about 28 million by the end of 2006 while a growing number of independent municipal networks have stripped the incumbent of much needed line rental income. The outlook for 2007 is less positive than in former years, with data services and mobile telephony likely to outgrow the fixed-line telephony sector by 9%, but lacking sufficient growth to prevent a stagnant market which may show zero growth in 2007. Broadband take-up has increased well in recent years, with competitors accounting for about 45% of the DSL market in 2006. Further growth in 2007 and 2008 may be affected by the Bundesrat having granted Deutsche Telekom a regulatory holiday for its VDSL network, as competitors are denied wholesale access - unless EC intervention enforces it during 2007 - and so lose commercial viability to build alternative networks. Nevertheless, consolidation in the cable sector has resulted in increased investment in network upgrades, providing a realistic alternative to the dominance of Deutsche Telekom.
The UK
The UK’s valuable communications sector is expected to see relatively modest and stable revenue growth to 2010, with falling fixed-line voice call volume being offset by higher usage of mobile voice calls and increased data traffic. Overall, the volume of telecoms traffic will grow to 2010 but price erosion in all markets, caused by competition more than regulatory intervention, will keep revenue growth at modest levels. The focus has shifted from fixed-line voice services to the mobile and triple play sectors. BT’s Openreach was an important innovation in 2006 which has resulted in more accessible broadband and influenced plans for structural separation elsewhere in Europe. Competitive pressures will be intense in 2007, with operators struggling to build and retain market share. The degree of consolidation is likely to vary across the main market segments: the mobile market is effectively controlled by five main operators, whereas the fixed-line market is fragmented, albeit dominated by BT. Convergence between mobile and fixed-line services is also expected to be an important component in the market, with companies such as BT developing hybrid fixed-line and mobile handsets and services, while Vodafone has branched into broadband using BT’s lines. In coming years the UK’s telecom landscape will be transformed by BT’s 21CN all-IP network, foreshadowing similar if less ambitious developments elsewhere in Europe.
