Rapid consolidation among Western European fixed-network operators driven by several factors

Though Western Europe's telecommunications market was opened to competition just two years ago, falling prices, intensifying competition, and rapid technological change have already altered the market and forced fixed-network operators to reassess their original business strategies. Companies are scrambling to reduce their exposure in core markets through mergers and acquisitions, according to Analysys Publications' (Cambridge, UK) "New Network Operators in Western Europe."

Incumbents and new entrants alike are struggling to determine which market will yield the greatest sustainable value in the wake of the declining core telephony market. "Attempting to predict the future shape of telecoms is like trying to forecast a new order following a revolution," explains Simon Sherrington, who co-authored the report with David Martin. The result of this uncertainty is rapid consolidation to attain the scale and breadth that will enable startups to compete with monopoly operators before profit margins in the fixed-voice market drop too low.

This consolidation is driven by several key factors. Retail prices are falling rapidly, particularly in long-distance and international markets, and distance is no longer commanding a premium. These declining prices have forced many companies to alter their long-range plans.

The increased availability of network capacity is also a driving force behind the recent flurry of mergers and acquisitions. As capacity increases, the cost of bandwidth falls-which allows resellers to drive prices even lower.

The commercial availability of broadband local-loop services via asynchronous digital subscriber line (ADSL), cable modems, and broadband wireless will enable operators to deliver high-value Internet and value-added services in addition to simple telephony.

Finally, local-loop bundling, recently introduced to many Western European markets, offers the possibility of significant local-service competition, if the cost of access is right. These factors combine to make consolidation the most attractive choice for fixed-network operators.

The report analyzes the key telecommunications companies in each of 16 countries. Also included are profiles of the service portfolios, commercial structure, and geographical scope of the 50 most influential new network operators. For more information, call 44 (0) 1223 341300, or visit www.analysys.com.

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