LONDON -- The convergence of fixed line and mobile telecommunication services has this year begun in earnest with potentially severe repercussions for the European Telecom Services market, says the fifth annual research report, ‘Facing Off on Convergence’, from Exane BNP Paribas and Arthur D little.

The 104 page report, developed from 72 interviews with senior operational managers at fixed and mobile operators, equipment manufacturers and Internet services providers in 11 European countries, garnered significant agreementon:

The arrival of hybrid handsets connecting to fixed, mobile and WiFi is driving the blurring and ultimately complete disappearance of traditional borders between fixed and mobile networks. Longer term, new technologies such as F-OFDM and WiMax will compound this situation whilst expanding the market. Antoine Pradayrol, head of the Telecom Operators Team at Exane BNP Paribas commented that, “Many fixed line operators will make the most of these opportunities to enter the mobile market, mainly via voice over IP, but the mobile operators will use 3G to extend their lead, not only on voice, but also on broadband data services. This augurs for a proliferation of offers and therefore stiffer competition in coming years.”

In bottom line terms the report forecasts, during the 2005-2010 period, the average growth in European telecom services to fall 0.8% pa, of which+3.1%pa on mobile and –1.3 pa on fixed line. This corresponds to a significant slowdown in mobile growth that currently stands at +8% pa (2002-2005) and deterioration in fixed line revenues that have remained flat in the same period. Thus, the share of household spending on telecom services will shrink.

Arthur D. Little

BNP Paribas