Europe's biggest incumbent telcos are losing the war of attrition against their increasingly competitive rivals in the fixed voice services sector, according to the latest numbers from market research firm InfoCom GmbH.InfoCom found that cable operators, mobile providers, and VOIP specialists are eating away at the traditional voice customer base that has been the incumbents' historical cash cow, and the carrier giants are losing market share as a result.

The former monopoly carriers in France, Germany, Italy, Spain, and the U.K. are all seeing their dominance eroded by the competition as regulators continue to pry open their respective markets. Add to that a mobile penetration rate of more than 90 percent across Western Europe, plus the emergence of VOIP, and it's little wonder fixed-line revenues are taking a hit.

Figure 1 below charts the decline based on a net revenue evaluation that includes wholesale activities.

Way down at the bottom of the graph, {dirlink 5|21} (NYSE: BT; London: BTA) has the lowest share of the five featured operators. Its 66.6 percent share, as of the middle of this year, shows how much pressure it's under from the cable firms, ntl group ltd. (Nasdaq: NTLI) and Telewest Global Inc. (Nasdaq: TLWT), and the highly competitive mobile operators.

It's not like BT hasn't reacted to this, though, as it has been busy building up what it calls its 'New Wave' services to make up for its telephony shrinkage. (See 'New Wave' Drives BT.)

And it's not just the British carrier that's feeling the heat. France Telecom SA (NYSE: FTE) had a 90.1 percent share of its domestic voice market in 2002, but that's now dipped to 85.2 percent. While that's still a significant chunk of the market, the French giant has seen 2.2 shaved off its share in the past year as rivals such as Iliad (Euronext: ILD) and neuf cegetel group make headway with their triple-play packages. (See Iliad's Free Strategy Pays Off and French Carriers Announce Merger.)

Elsewhere on the continent, {dirlink 5|182} (NYSE: TI) commanded 83.9 percent of its fixed voice market at this year's half way point, Telefónica SA had an 80.5 percent share in Spain, and Germany's Deutsche Telekom AG (NYSE: DT) claimed a 79.9 percent share.

Equally as worrying for the incumbents is that the pace of their market share declines have been accelerating, according to InfoCom's research. Table 1 shows the percentage of market share the operators have lost during the past three years.

Table 1: Percentage Decline in Incumbent Market Share 2002-2005

Spanish carrier Telefónica suffered the most during the period, dropping 5.7 percent, while Telecom Italia seems to have been most successful at stemming its losses, having shed just 1.4 percent of its share overall. But even it has lost 0.9 percent in the past year, after remaining unchanged in the previous 12-month period.

— Nicole Willing, Reporter, Light Reading