Western Europe's incumbent telecoms operators must look beyond their collective EUR240bn long-term debt and define their strategic options now, says the report The Future of Telecoms Incumbents: the Impact of Competition, Regulation and Customer Demand from Analysys (www.analysys.com).
The report reveals that 14 incumbents had long-term debt at the end of 2001 ranging from EUR1bn to EUR67bn. Half had gearing of more than 95%.
"Management of long-term debt is clearly the principal driver of incumbents' decision-making today, as they attempt to restore shareholder value," said author Tamsin Pert. "But they also need to consider how they can create value and maintain competitive advantage in the longer term.
"Scenario planning will be key to assessing the potential impact of their decisions."
Nevertheless, the European market is still growing - by 9.5% in 2001 - but characterised by unpredictable demand, weak competition and confused regulation. GPRS and 3G networks will be crucial for most incumbents, many of which are already under financial constraints and have capped expenditure for the next few years.
After the domination of vertical integration and globalisation, incumbents now have a more modest approach based on financial stability and increasing margins in what is likely to be a very uncertain market for the next five years. Many are restructuring portfolios and disposing of non-core assets.
Three broad groupings are emerging: those maintaining a global strategy (Globetrotters); those with ambitions in a defined market area (Eurovisionaries); and those downsizing to focus on a domestic market (Homebodies). But most are putting fixed broadband at the heart of their domestic strategies to bolster margins.