& 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
From The Founder
Download our complete guide to de-risking NFV deployment in 2016, including:
  • An eight-step strategy to deploying NFV safely, based on input from the companies that have already started virtualizing their production networks.
  • Interviews with leading executives at Colt, AT&T, Deutsche Telekom, Cisco, Nokia, ZTE, Ericsson and Heavy Reading.
  • Flash Poll
    Live Streaming Video
    Prepping for the Future: Upskill U Explained
    During this short kick-off video, Doug Webster, Vice President of Service Provider Marketing, Cisco, and Light Reading’s CEO & Founder Steve Saunders give an overview of Upskill U.
    LRTV Interviews
    AT&T Expert on the Key Pillars of UC

    4|29|16   |   03:58   |   (0) comments


    Vishy Gopalakrishnan, AVP of product marketing at AT&T, talks about the three developments that are making unified communications and collaboration secure and reliable for enterprise users.
    LRTV Documentaries
    LRTV Report: Mobile Core Innovation

    4|28|16   |   25:32   |   (0) comments


    Hear from multiple industry experts from Deutsche Telekom, SK Telecom, Heavy Reading, Huawei, Cisco, Ericsson, Nokia, NEC and many more about developments in the mobile core as operators virtualize their IMS and evolved packet core systems and prepare for a 5G world.
    LRTV Huawei Video Resource Center
    NFV World Congress Highlight

    4|26|16   |     |   (0) comments


    The highlight of the NFV World Congress contains exciting telecom news. Join us for an inside look at Huawei's ICT 2020 plan and its latest collaboration with industry leaders.
    LRTV Interviews
    Unified Comms Finds Its Voice

    4|25|16   |   03:44   |   (0) comments


    Peter Quinlan, VP of UCC Product Management at Tata Communications, talks about the evolution of the unified communications and collaboration services sector and how voice is now a big part of current developments.
    LRTV Documentaries
    So... What Do We Do Now?

    4|25|16   |   03:24   |   (0) comments


    After a long hiatus, Max Dingman, the CEO of a GeeGhiz, returns for a motivational board room pep talk.
    LRTV Documentaries
    NAB 2016 Highlights

    4|21|16   |     |   (0) comments


    Light Reading's Cable/Video Practice Leader Alan Breznick climbs down from the slots to tell us about the latest news in broadcast technology at NAB 2016 in Las Vegas.
    Between the CEOs
    CEO Chat: Deepfield's Craig Labovitz

    4|21|16   |     |   (0) comments


    In this latest installment of the CEO Chat series, Craig Labovitz, co-founder and CEO of Deepfield, sits down with Light Reading's Steve Saunders in Light Reading's New York City office to discuss how Deepfield fits in with the big data trend and more.
    Shades of Ray
    Leading Lights 2016: Shortlists Announced

    4|20|16   |   0:53   |   (0) comments


    The judging is over and the Leading Lights 2016 shortlists have been published -- you can see who made the cut by clicking on this link.
    LRTV Custom TV
    Introducing MulteFire – Qualcomm at MWC 2016

    4|18|16   |   3.29   |   (0) comments


    MulteFire is the latest option for using LTE in unlicensed spectrum. As oppose to its close 'siblings', LAA and LTE-U, MulteFire operates solely in unlicensed spectrum, which enables it to offer the best of two worlds – LTE-like performance with WiFi-like deployment simplicity. In this interview, Sanjeev Athalye, Sr. Director, Product Management at Qualcomm ...
    Between the CEOs
    CEO Chat: Grant Van Rooyen of Cologix

    4|18|16   |     |   (0) comments


    Grant van Rooyen, president and CEO of Cologix, sits down with Steve Saunders, founder and CEO of Light Reading, in the vendor's New Jersey facility to offer an inside look at the company's success story and discuss the importance of security in the telecom industry.
    LRTV Huawei Video Resource Center
    ONS 2016 – Demonstration of Huawei's NetMatrix Multi-Vendor SDN Orchestrator

    4|15|16   |     |   (0) comments


    This demonstration shows how Huawei's NetMatrix SDN Orchestrator (SDN-O) addresses an operator's core service agility needs for services spanning multi-domain, multivendor networks: it includes a demonstration of:
    - Rapid New Service Design: using YANG to model a complex example of multi-domain, multivendor L3VPN network connectivity service that ...
    LRTV Custom TV
    AT&T Wants to Own North Carolina

    4|15|16   |     |   (1) comment


    Venessa Harrison, president of North Carolina for AT&T, tells how the company will expand its GigaPower service beyond the seven N.C. cities it already serves.

  • This blog, sponsored by AT&T, is the second part of a ten-part series examining next-generation broadband technologies titled "Behind the Speeds."
  • Upcoming Live Events
    May 23, 2016, Austin, TX
    May 23, 2016, Austin Convention Center
    May 24-25, 2016, Austin Convention Center, Austin, TX
    September 13-14, 2016, The Curtis Hotel, Denver, CO
    December 6-8, 2016,
    June 16-18, 2017, Austin Convention Center, Austin, TX
    All Upcoming Live Events
    Infographics
    A new survey conducted by Heavy Reading and TM Forum shows that CSPs around the world see the move to digital operations as a necessary part of their overall virtualization strategies.
    Hot Topics
    Ultra-Broadband Summit, Hong Kong
    Iain Morris, News Editor, 4/27/2016
    WiCipedia: Woman Cards & Bitch Switches
    Sarah Thomas, Director, Women in Comms, 4/29/2016
    FCC Poised to Re-Regulate Wholesale Access
    Carol Wilson, Editor-at-large, 4/28/2016
    Mitel Asks: What Time of Day Do You Shower?
    Mitch Wagner, West Coast Bureau Chief, Light Reading, 4/25/2016
    GoT Fans Curse HBO (Not Right) Now
    Mari Silbey, Senior Editor, Cable/Video, 4/25/2016
    Like Us on Facebook
    Twitter Feed
    BETWEEN THE CEOs - Executive Interviews
    In this latest installment of the CEO Chat series, Craig Labovitz, co-founder and CEO of Deepfield, sits down with Light Reading's Steve Saunders in Light Reading's New York City office to discuss how Deepfield fits in with the big data trend and more.
    Grant van Rooyen, president and CEO of Cologix, sits down with Steve Saunders, founder and CEO of Light Reading, in the vendor's New Jersey facility to offer an inside look at the company's success story and discuss the importance of security in the telecom industry.
    Animals with Phones
    Live Digital Audio

    Of all the tech companies in the Valley, Intel has made the most aggressive commitment to building a diverse and inclusive workplace culture. It's doing so by taking concrete, measurable steps, making a large financial investment and through a commitment to complete transparency about its progress. In this radio show, WiC Director Sarah Thomas will be joined by Shlomit Weiss, Intel's Vice President, Data Center Group, and General Manager of Networking Engineering, who will share with us why Intel is tackling this huge challenge, how and to what effect. She will also discuss her unique experiences leading development of Client SOC development in the past and today leading development of all of the chipmaker's silicon hardware for networking IPs and discrete devices and managing a team of 600 engineers across Israel, Europe and the US.