& cplSiteName &

Euro Telcos Must Cut to Survive – Report

Light Reading
News Wire Feed
Light Reading
2/13/2014
50%
50%

LONDON -- Although significant progress has been made by European telecommunications companies in rationalising their operational models, transformative cost reduction programmes, of up to €100 billion in total, are required if industry players are to survive and return to a sustainable growth trajectory. This is according to a new AlixPartners study and C-level survey on cost and profitability in the sector, which is published ahead of the Mobile World Congress in Barcelona.

The challenges facing the industry loom large in 2014, a year in which many experts expect to see a fifth consecutive revenue decline for European telcos. The AlixPartners 2014 EMEA Telecoms Executive Survey on Cost and Profitability Imperatives, which interviewed a representative panel of senior telecoms executives across France, Germany, Italy and the UK, finds that, although cost reduction opportunities in the sector are great, the best intentions of executives are not often reflected in the end results. The study proposes that, in order to return to a competitive footing globally, operators need to go beyond their current strategies of tactical and incremental cost cutting and instead pursue a transformative approach to achieve sustainable cost reduction and foster the necessary conditions for their other strategic priority, revenue growth. Today, however, the stark reality is that companies are simply not doing enough in either area, and the AlixPartners survey highlights a fundamental tension in chief executives’ attitudes to cost reduction. While some 60% of respondents said they would like to adopt “radical” cost-cutting methods, over two-thirds (67%) admitted that their companies’ approach to cost reduction had not notably changed over the past five years, suggesting that, although the will to overhaul business models to ensure healthy future returns is not lacking at a boardroom level, companies are failing to deliver significant transformation.

The stakes have never been higher for companies in this sector, says the study. European telecoms operators are not only up against low financial returns but also a complex mix of structural, strategic and regulatory pressures, all likely contributing to increased M&A activity, with major deals in 2013 such as Vodafone/Verizon, Vodafone/KDG and America Movil/KPN, and many other deals now ongoing (e.g., Vodafone/Ono in Spain, Bouygues/SFR in France and Vodafone/Kabel Deutschland in Germany).

In a low-growth environment such as today’s, according to the study, telco CEOs are facing unprecedented pressures on their operating costs. At the same time, 56% of those surveyed anticipated that their funding needs for infrastructure investment, such as next-generation 4G technology, would increase, whereas only a third expected healthy returns on invested capital (ROIC) from their investments in mobile and fixed data services. The severe market view on European telcos (Price to Earnings ratio of 21.5 vs. 29.9 in North America) therefore seems to be shared by executives themselves, who, worryingly, seem to lack confidence in their own capacity to generate healthy returns, hardly a reassuring sign for investors. A vast majority of executives are determined to take action to curb revenue declines, as 95% of those surveyed stated that their company had approved or planned a cost reduction project for the next 12 to 18 months, with the main areas cited by respondents as integral to this process being network upgrades, product reviews and strategic reviews of countries. Yet, their poor track record in executing such plans, added to the current turbulence within the sector, should be cause for scepticism, says the study. The survey shows that the failure of traditional tools (incremental cost reduction schemes, basic efficiency plans, etc.) can be at least partly explained by a lack of persistence in their implementation, with 43% of respondents saying that previous such programmes did not reach completion due to other projects taking priority. Caught between the rock of an unconvincing record in driving substantial operational change and the hard place of current pressures on business models resulting from the fiercely competitive market, European telecoms operators appear to be paralysed by the complexity of the challenge ahead, says the study, and they must learn to navigate these rough waters in order to avoid being swept away.

AlixPartners LLP

(0)  | 
Comment  | 
Print  | 
Newest First  |  Oldest First  |  Threaded View        ADD A COMMENT
Light Reading’s Upskill U is a FREE, interactive, online educational resource that delivers must-have education on themes that relate to the overall business transformation taking place in the communications industry.
NEXT COURSE
Wednesday, July 27, 1:00PM EDT
The Changing Face of the Data Center World
Rodney M. Elder, Senior Solutions Architect, Equinix
UPCOMING COURSE SCHEDULE
Wednesday, August 3, 1:00PM EDT
The Central Office Re-Architected as a Data Center
Guru Parulkar, Executive Director, Open Networking Research Center, Open Networking Lab
Wednesday, August 10, 1:00PM EDT
Telcos & Open Source 101
Phil Robb, Senior Technical Director, OpenDaylight
Friday, August 12, 1:00PM EDT
The Role of Open Source in NFV
Jim Fagan, Director, Cloud Practice, Telstra
in association with:
From The Founder
In the first episode of a four-part series, Light Reading Founder and CEO Steve Saunders and Calix President and CEO Carl Russo drive around town discussing the disruptive mega-changes in the communications industry and where hope lies for service providers to meet the escalating demands of the cloud.
Flash Poll
Live Streaming Video
Charting the CSP's Future
Six different communications service providers join to debate their visions of the future CSP, following a landmark presentation from AT&T on its massive virtualization efforts and a look back on where the telecom industry has been and where it's going from two industry veterans.
Telecom Innovators Video Showcase
VeEX Test & Measurement Solutions

7|25|16   |   08:57   |   (0) comments


Cyrille Morelle, president and CEO of VeEX Inc., talks test and measurement with Light Reading's Steve Saunders at BCE 2016. This includes innovative products such as VeSion Cloud-Based platform for network monitoring; MTTplus Modular Test platform for Access, Business, Carrier Ethernet, Transport and Core services; and OPX-BOX+ for Fiber Optics.
LRTV Custom TV
VeEX: Live From BCE 2016

7|25|16   |   03:20   |   (0) comments


VeEX's Senior Director of Business Development, Perry Romano, explains how VeEX provides tools to help install, maintain, monitor and manage network infrastructure efficiently and effectively. The portfolio of products on display include the RXT-6000, MTTplus and TX300s.
LRTV Custom TV
Real-Time Telemetry & Analytics for Intelligent SDN Orchestration

7|25|16   |   03:09   |   (0) comments


Packet Design CEO Scott Sherwood discusses how real-time network telemetry and analytics are enabling a new breed of SDN orchestration applications.
From the Founder
The Russo Report: Driving Disruption

7|25|16   |   07:44   |   (0) comments


In the first episode of a four-part series, Light Reading Founder and CEO Steve Saunders and Calix President and CEO Carl Russo drive around town discussing the disruptive mega-changes in the communications industry and where hope lies for service providers to meet the escalating demands of the cloud.
LRTV Custom TV
NetScout: Maximizing Enterprise Cloud for Digital Transformation

7|20|16   |   04:53   |   (0) comments


Light Reading Editor Mitch Wagner talks to NetScout CMO Jim McNiel about maximizing the benefits of enterprise cloud and digital transformation while minimizing potential pitfalls with a proper monitoring and instrumentation strategy.
Women in Comms Introduction Videos
Ciena's VP Offers a Career Crash Course

7|20|16   |   4:14   |   (0) comments


How did Ciena's Vice President of Sales, Angela Finn, carve out her career path? Simple, she tells WiC. She stayed true to her company, customers and principles. She shares her advice for women on how to be authentic and credible, as well as for companies that want to make a real change to their culture and practices.
LRTV Custom TV
NFV in 2016: Part 2 – Climbing the Virtualization Maturity Curve

7|19|16   |   06:56   |   (0) comments


Many of the initial use case implementations are single-vendor and self-contained. The industry is still climbing the virtualization maturity curve, needing further clarity and stability in the NFV infrastructure (NFVi) and greater availability and choice of virtualized network functions (VNFs). Interoperability between NFVis and VNFs from different vendors ...
Telecom Innovators Video Showcase
Versa Networks' Kumar Mehta on SD-WAN Managed Services

7|19|16   |     |   (0) comments


In Silicon Valley, Steve Saunders sits down with Versa's Kumar Mehta for an interview focused on why service providers are building SD-WAN managed services, and how Versa's telco customers are innovating.
LRTV Custom TV
Juniper Networks & The Evolution of NFV

7|19|16   |   06:01   |   (0) comments


Senior Juniper Networks executives talk to Light Reading Founder & CEO Steve Saunders about NFV developments and the recent independent evaluation by test lab EANTC of Juniper's Cloud CPE solution.
LRTV Interviews
CenturyLink Goes Beyond Managed WiFi

7|19|16   |     |   (0) comments


CenturyLink's managed WiFi allows enterprises, such as retailers and resorts, to track guest WiFi usage in order to help them better communicate with customers.
LRTV Interviews
AT&T Launches Network Functions on Demand

7|17|16   |   05:26   |   (0) comments


Roman Pacewicz, Senior Vice President, Offer Management & Service Integration, AT&T Business Solutions, discusses the operator's launch of its Network Functions on Demand service.
LRTV Interviews
Enterprise Pitch for Ciscosson

7|14|16   |   04:43   |   (0) comments


After seven months of near silence, Cisco and Ericsson executives publicly discussed details on their extensive partnership. Among the tidbits shared by Martin Zander, VP, group strategy programs, Ericsson, and Doug Webster, VP service provider marketing, Cisco: The partnership was initially launched to serve the service provider market, but is already gaining ...
Upcoming Live Events
September 13-14, 2016, The Curtis Hotel, Denver, CO
September 27, 2016, Philadelphia, PA
November 3, 2016, The Montcalm Marble Arch, London
November 30, 2016, The Westin Times Square, New York City
December 6-8, 2016,
May 16-17, 2017, Austin Convention Center, Austin, TX
All Upcoming Live Events
Infographics
Five of the Top 10 most targeted countries in Check Point Software Technologies' global Malware & Threat Index for Q1 2016 are in Africa.
Hot Topics
Ericsson 'Doubles' Savings Goal as Sales Slump
Iain Morris, News Editor, 7/19/2016
Kevin Lo's Move to Facebook: Sign of Things to Come?
Patrick Donegan, Chief Analyst, Heavy Reading, 7/20/2016
Verizon's Next With VNFs
Carol Wilson, Editor-at-large, 7/21/2016
Facebook Gets Its Drone On
Ray Le Maistre, Editor-in-chief, 7/22/2016
Ericsson Ejects CEO Vestberg
Ray Le Maistre, Editor-in-chief, 7/25/2016
Like Us on Facebook
Twitter Feed
BETWEEN THE CEOs - Executive Interviews
There's no question that, come 2020, 5G technology will turn the world's conception of what mobile networking is on its head. Within the world of 5G development, Dr. ...
I've enjoyed interviewing many interesting people since I rejoined Light Reading, but William A. "Bill" Owens certainly takes the biscuit, as we say where I come from.
Live Digital Audio

Our world has evolved through innovation from the Industrial Revolution of the 1740s to the information age, and it is now entering the Fourth Industrial Revolution, driven by technology. Technology is driving a paradigm shift in the way digital solutions deliver a connected world, changing the way we live, communicate and provide solutions. It can have a powerful impact on how we tackle some of the world’s most pressing problems. In this radio show, Caroline Dowling, President of Communications Infrastructure & Enterprise Computing at Flex, will join Women in Comms Director Sarah Thomas to discuss the impact technology has on society and how it can be a game-changer across the globe; improving lives and creating a smarter world. Dowling, a Cork, Ireland, native and graduate of Harvard Business School's Advanced Management Program, will also discuss her experience managing an international team focused on innovation in an age of high-speed change.