The European telecoms sector is facing the need for cost cuts amounting to €100 billion in order to return to sustainable growth after four consecutive years of declining financial performance and forecasts suggesting that 2014 will be the fifth year in the red for the sector, according to a report by advisory group AlixPartners, cited by the Financial Times.
Sector players will have to find meaningful cost-cutting measures to be able to survive in a market that has become extremely competitive in recent years. AlixPartners interviewed senior executives from the telecoms sector in the UK, Italy, France and Germany ahead of Mobile World Congress that will take place inBarcelona between 24 and 27 February.
Some 60% of executives were willing to implement radical cost-cutting measures but said that their company's approach to cost cuts has remained largely the same over the last five years. Since the industry has been pressured by cuts in regulated prices and a push to adopt next-generation technology, combined with the economic decline, telcos have been struggling with falling revenues and some have been forced to sell assets and raise additional liquidity. What's more, although more than half of respondents said they expect investments in infrastructure such as 4G technology to rise, only a third expected significant returns on these investments.
Commenting on the survey, AlixPartners managing director Eric Benedict said that telecom companies should wake up to the fact that their business models need a major rethink if they want to reverse the negative revenue trend. An increase in mergers and acquisitions is expected in this situation, the advisory firm forecast.