Obviously a problem will occur regarding with the expanding gap within the United States telecoms companies and its European counterparts as when the bosses of global mobile operators meet in Barcelona. The recession, unyielding regulations and over-crowded market are restricting European telcos’ capability to invest in faster networks, widening the risk that the region’s recession economy drop further behind some parts of Asia and the United States.
Therefore, since 2008 with the European telco stocks now trading at about 9.9. times over the United States peers of approximately 17.6 times. When it comes to the competitive view, the gap indicates some differences. Europe has almost 100 mobile firms and six of them has been located in the United States, also the severe rules that have contributed to four straight years of revenue decline and weaken profitability.
The European telcos find it difficult to raise or obtain money and become progressively cautious of funding network upgrades that undergo years to pay off, but are essential to the economic development and it serves as a real world consequences. According to the Chief Financial Officer Gervais Pellissier of France Telecom, if it was just an estimation breach of 5 percent it wouldn’t really matter, but when it comes to the big things, it clearly has some serious consequences.
Investment in networks may fall than many would wish, if European operators don’t get their financing capacity back and recover higher stock market valuations, he added. Through 2016, global carriers should invest $800 billion in their networks to sustain with the smartphone and tablet computer slam, particularly on 4G or fourth generation mobile technology and fibre broadband that propose up to 10 times faster internet speeds, it was according to trade group GSMA.
Europe’s players have been suffering in paying debts as their ability to produce cash is hit by tough competition while South Korean, Japanese and United States telcos invest intensely in networks. Thus, they are developing 4G and fibre broadband only moderately, having swathes of Europe poorly wrapped. Meanwhile in the United States, AT&T and Verizon Wireless administering 70 percent of the mobile market and their virtual duopoly has let them to increase profits and sales, restricting the path of European peers.
As they have guaranteed higher prices from consumers progressively into smartphones like Samsung and Apple. In the first half of the current fiscal year, Europe’s largest mobile operator Vodafone noticed its revenue dip 0.4 percent and 30.5 percent of its operating margin.
Europe’s telcos have cut costs to cope with lower sales, however it doesn’t help as the prices keep on dropping. If the valuation breach continues, it could open some opportunities for outside firms that looks for bargain acquisitions in Europe. When they notice regulator Neelie Kroes at the Mobile World Congress in Barcelona, European telco bosses seem to hear the alarm.
REFERENCES:
http://gadgets.ndtv.com/telecom/news/mwc-divide-between-european-and-us-telcos-widens-335092
http://www.i4u.com/2013/02/carlos-slim-helu/us-telcos-european-widens-and-between-divide-mwc
http://www.interaksyon.com/infotech/mwc-2013-divide-between-european-and-u-s-telcos-widens
http://www.viewheadlines.com/technology/728719/Divide-between-European-and-U-S-telcos-widens.html
