Outlook bleak for European telecoms, says Moody’s

The outlook for telecom service providers in the EMEA markets remains negative, with revenues in Europe likely to decline by up to 2% next year, according to a report from Moody’s Investors Service.

Residential customers are likely to act price-sensitively, putting pressure on companies’ top lines. While competition is likely to intensify in the lucrative mobile space, operators will also remain under pressure to step up investments to deliver high-speed, high-capacity networks.

“European telecom service providers are likely to find 2013 as challenging as this year,” said Carlos Winzer, a senior vice-president in Moody’s corporate finance group and co-author of the report. “We expect the intense competition on prices and declining domestic revenues to significantly eat into their profits despite the positive contribution from international diversification to their consolidated accounts. In companies’ domestic businesses alone, we forecast an average decline of between 5% and 10% in those countries most affected by the deteriorating macroeconomic environment in the euro area.”

Moody’s expects more positive developments in Russia and the Middle East, with single-digit revenue growth for Russian operators likely to arise from strong demand for mobile data, and growth in data services in the Gulf region compensating for flattening of mobile revenues.

Prospects for the euro area are expected to become more positive in the medium term, with a return to growth over the next three to five years and the ending of regulator-driven declines in mobile termination rates after 2013.