The CES trade show in Las Vegas is where retailers and operators turn their attention in early January. But there was another announcement that caught the eye of the UK telecoms industry, this time from Europe – namely, attempts by the European Commission to create a single European telecoms market.
Under the plans, which were revealed by The Financial Times, companies would share assets such as masts and even spectrum, as well as encourage consolidation. Digital commissioner Neelie Kroes told the newspaper that the move would promote competition and investment.
Matthew Howett, analyst at Ovum, says this move is something the European Commission has been considering since the late 1990s. He says it could be attractive to incumbent telecoms companies who want to alleviate pressure on their balance sheets. But he adds: ‘It is difficult to see how it would work in practice.’ He was even more sceptical about spectrum sharing: ‘I’ll believe it when I see it.’
Howett says operators are doing a lot of the things proposed by the EC at a national level. While there are six major operator brands in the UK – EE, Orange, T-Mobile, Three, Vodafone and O2 – there are only effectively two networks because of the Cornerstone and MBNL network infrastructure sharing programmes. Howett says: ‘What the EC is looking to do is extend that on a bigger scale.’
Telefónica chief operating officer José María Álvarez-Pallete said it would be ‘very hard’ to forsee a single pan-European network, because of the levels of cooperation between operators at a national level. He said the proposal could open the door to more European takeovers.
UK operators were privately bemused by Europe’s plans, sharing Howett’s point that telecoms are sharing infrastructure already. One senior source said: ‘It looks like a bit of a pipe dream. It strikes us a bit as a driver by the European regulator to show that they are doing something. But it seems highly unlikely that this will happen in practice. The technology requirements alone would be extraordinary. You only need to look at how difficult it is to do a network share generally in a local market like the UK, let alone with foreign networks trying to join up.’
Another source says it follows plans to unite national energy and gas markets by 2014. One says: ‘The EC strongly believes in the single market and if you see drastic variations between markets in member states, which there is in telecoms, then it’s a failed single market.’
Operators are also afraid of the likelihood of roaming being abolished and leading to a single pricing structure, arguing they have already been hit by changes to mobile termination rates. One says: ‘The regulatory pressure on telecoms companies, particularly in the UK, is huge. Look at revenues – once you take regulation into consideration, each of the big players take a hit. We have got to make this shortfall up somehow.
Senior sources say network coverage is increasingly the differentiator within the sector. One argues that, by removing ultimate control of a network and placing it in the hands of a pan-European joint venture, the EC would ultimately turn operators into MVNOs. ‘When the network is becoming more and more of a defining factor, if you move to harmonise it, you are heading towards a commoditised market.
‘Everyone gets access to the same services, whether it’s 4G or HD voice calls all at the same time. Where can you differentiate? The only place is price, and revenues are already under pressure,’ the source added. Which may be great news for the consumer, but not for a telecoms sector already under the cosh.
Author: Graeme Neill