Telecoms sector growing despite crisis, says EU report

Europe’s telecom companies continued to grow significantly in 2008 despite the financial crisis, according to a European Commission report encouraging the sector to engage in new investment. But operators disputed the claims, saying growth had reached its lowest level in the last five years.

EU telecoms revenues increased by 1.3% in 2008, amounting to over €300 billion, according to an annual report on the sector published by the Commission yesterday (25 March). 

Growth rates in the sector were above average compared to the rest of the EU economy, which grew by just 1% in 2008, the EU executive noted in the report.

Viviane Reding, the EU’s information society commissioner, underlined that revenues have kept growing steadily year-on-year since her appointment in 2004. “I’m not ‘the end of telecoms’: the sector is growing,” she told reporters in Brussels, reacting to complaints from big telecoms firms, which have accused her of slowing growth in the sector with a number of unnecessary regulations.

Reding introduced caps on mobile roaming services in 2007, triggering furious reactions from telecoms firms, which have accused her of “populism” (EURACTIV 23/05/07).

In fact, the Luxembourg commissioner prides herself on having contributed to cutting consumer prices by almost 35% since she came into office. “Consumers pay less while getting better value for money,” the Commission summarised in a statement. But Reding does not plan to stop there. Recently, she announced plans to cut mobile termination rates, which are the fees companies pay each other to support telephone services and which represent a significant share of the revenues of major telecoms operators (EURACTIV 19/02/09).

As a result, large EU telecoms firms claim they have been forced to slash investment. According to figures by ETNO, the association representing large EU telecoms companies, investment in 2008 hit its lowest level for five years, with growth reaching only 1.5% in 2008 compared to 4.1% in 2006.

But the Commission reads the figures differently. “In 2007, investment increased by around 1.5%, thus marking the sixth consecutive year of growth. This trend is likely to continue in 2008, although with a flattening trend as a consequence of the financial crisis,” according to the EU executive’s report.

The row over investment figures is not as anecdotal as it seems, as the figures formed the basis for the decision to replacing telephone copper lines with optical fibre connections (so-called NGNs). NGNs are considered as the most important future development in the sector, enabling super-fast Internet and a number of new, premium services.

Agreement ‘close’ on telecoms package

Next week the Council and the Parliament will meet again trying to hammer out an agreement on a broader revision of telecoms rules, which have been in the making since 2007 (see EURACTIV LinksDossier).

“I am very confident that a deal is within reach if all sides make a small last effort,” Reding told a news conference ahead of the meeting, saying “ninety-five percent of the package has been agreed”.

Reding said she was optimistic regarding the outcome of the negotiations, but downplayed the importance of fibres: “It is a small element of a huge package,” she said yesterday.

Brussels is pushing for a model which would favour smaller operators, with the aim of making the market more competitive. But many member states (mainly Germany and Spain) instead support national champions on the grounds that large investment can be better supported by big companies. 

Optical fibre backbones are considered the future of telecommunications infrastructure because they allow a faster and wider transmission of data. They are at the core of so-called 'Next Generation Networks' (NGNs).

Fibre networks have been deployed slowly across the EU so far, covering a marginal share of national markets. NGNs today only account for around one million subscribers in the EU, in comparison with three million in the US and 11 million across the most developed Asian countries, mainly Japan and South Korea.

Investment in Europe is currently low. To upgrade EU networks, at least 300 billion euro of investment will be necessary, according to estimates by McKinsey, a consulting company. The EU is currently debating which model is more appropriate to spur investment.

  • 31 March 2009: Telecoms Council.
  • April/May 2009: Commission expected to publish recommendations to spur investment in optical fibre connections.
  • By end of Commission mandate: Expected agreement on telecoms package.

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