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Transatlantic cable
March 2016
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www.read-eurowire.comsubscribers with a detailed analysis of the short-term outlook for
North American and European telecom carriers. Here, abridged
and lightly edited, are the main points made by
Bloomberg
analysts John Butler, Matthew Kanterman, Joshua Yatskowitz
and Erhan Gurses in “Global Communications 2016.”
North America
The USA wireless market is likely to remain highly
competitive this year. In Canada, spectrum auctions, wireline
stabilisation, and the sluggish economy will probably be
the main concerns. Mobile content is an emerging theme as
carriers seek growth through new services.
A price war is poised to enter its third year in the USA, with
T-Mobile and Sprint slashing prices in a bid to take market
share from AT&T and Verizon. The potential entry of cable
companies into the wireless market will only add to this
pressure, likely weighing on revenue growth and margins.
Spectrum – essential to all wireless networks for over-the-air
transmission of analogue and digital signals including voice,
video and data – is the most precious asset in wireless. The
value of spectrum in the latest US Federal Communications
Commission (FCC) auction rose signi cantly above prior
auctions and the secondary market, underscoring the need
for more of this resource. With the pending auction of 600
MHz licences in rst-quarter 2016, spectrum scarcity will
likely remain a key industry theme.
Incumbent wireline carriers’ signi cant exposure to legacy
voice and low-bandwidth data services will further impact
their revenue growth and margins this year.
Network investments, high-bandwidth data, and business
services promise to o set some of this pressure. Carriers
may reconsider investment in data centres following
Windstream’s sale of its data centre business and
CenturyLink’s strategic review. The consolidation of bre
assets could slow as the number of potential targets shrinks.
Europe
Revenue growth for the European telecom industry in 2016
will depend largely on ability to stimulate and monetise
demand for data amid a tepid economic recovery and
regulatory uncertainty. Fixed-mobile convergence will set
the tone of competition, with varying levels of promotional
activity across countries. Potential consolidation in Italy and
the UK, even with stricter remedy requirements, supports
pricing power. Capital spending will moderate as 4G
networks near completion.
This year is expected to mark an in ection point for the
European telecom industry, with the consensus favouring
a return to revenue growth for the rst time since 2009.
Progress in 4G population coverage, which reached an
average 75 per cent in western Europe in third-quarter 2015,
will further aid revenue this year, potentially driving industry
expansion. The GSMA forecasts one per cent growth in
mobile revenue over the period 2017-2020.
At less than 20 per cent, adoption of 4G remains relatively
low. Take-up of 4G may accelerate in 2016 as smartphone
prices decline and marketing e orts increase. According to
the market research rm IDC, smartphone prices fell 12 per
cent in the rst nine months of 2015.