Increasing competition, pricing pressure, and operating cost issues have all played their parts in depressing the profit margins of a number of incumbent and significant competitive carriers, though there are still a few that are bucking the trend.
One way to address the situation is by cutting costs, so TDC is cutting between 5 and 7 percent of its Danish staff this year -- that's between 650 and 910 jobs being cut. The cull is starting at TDC Solutions, the fixed-line services division, where 465 folk will be made redundant.
Swisscom is keen to find growth opportunities outside its domestic market, which is why it's buying Italian triple-play pioneer Fastweb SpA (Milan: FWB). (See Swisscom Bids $4.9B for FastWeb.)
The main cause of that profit reverse was a change in the carrier's executive incentive scheme from a cash bonus plan to a stock options-based incentive scheme. The cost of converting from one scheme to the other, and the resulting conversion of outstanding and accrued cash bonuses into stock, bit a hole in the first quarter's profits. The move wasn't a hit with investors, as Golden's share price lost $4.20, nearly 7 percent, on Tuesday to close at $56.54.
Bucking the trend
Not all of Europe's carriers are reporting lower profits, though. Telecom Italia (TIM) , the subject of much ownership attention in the past few weeks, has just announced a 4.2 percent rise in first-quarter profits, to €775 million ($1.05 billion), from revenues of €7.54 billion ($10.2 billion), up nearly 1 percent. (See Telecom Italia Reports Q1 and Telefónica Takes Stake in Telecom Italia.)
And French alternative carriers Iliad (Euronext: ILD) and Neuf Cegetel Group (Euronext: NEUF) continue to perform well, having both announced significant profit gains in their full-year 2006 reports, and, more recently, healthy revenue increases in the first quarter of 2007. (See Iliad Reports Q1, Iliad Reports 2006, Neuf Cegetel Reports Q1, and Neuf Cegetel Reports 2006.)
— Ray Le Maistre, International News Editor, Light Reading