By Leila Abboud and Claire Davenport

PARIS/BRUSSELS (Reuters) - Telecom executives were generally downbeat about proposals for a revamp of European Union regulation because price caps and limits on roaming charges would hit their profits soon, while ideas they liked were less sure to be adopted.

The European Commission unveiled reforms on Wednesday to foster a cross-border market for telecom services and spur investment in networks to help Europe catch up with the U. S. and Asia in the broadband and mobile race.

The industry welcomed some proposals such as giving the EU veto power over auctions of mobile spectrum and letting operators charge web companies for carrying data-heavy services at high speeds.

But since these ideas are controversial with the member states and EU Parliament, which must ratify the law, telecom executives fear they might not get through.

One, who declined to be named, said: "Short term, there is certain pain for operators. Long-term there are gains, but they are uncertain because of the legislative process ahead."

As it stands, the proposals being steered by EU telecoms chief Neelie Kroes will hit operators' bottom line because of consumer-friendly measures.

They would put caps on cross-border fixed phone calls in Europe at the price of a long-distance domestic call and limit, to 19 euro cents a minute, the price for users making cross-border mobile calls.

JP Morgan analysts estimate the change would cost 500 million to 1 billion euros (420 million pounds-840.81 million pounds) in lost sales and operating profit for European operators.

The hit would be biggest for Vodafone <VOD. L>, with 142 million European subscribers and a large base of corporate customers, followed by KPN <KPN. AS>, Deutsche Telekom <DTEGn. DE> and Orange <ORAN. PA>, according to Bernstein Research.

The changes to roaming charges proved to be less harsh than some had feared from earlier drafts. Operators are encouraged to form alliances to escape price caps, eventually meaning consumers will not pay extra when travelling.

Analysts said it was hard to quantify the financial impact as it was unclear whether operators would join alliances.

The GSMA, a trade group of global telcos, estimated that the impact of driving roaming prices down to domestic rates and ending fees for incoming calls to users while they were travelling would cut revenues by up to 2.3 billion euros.

Executives interviewed by Reuters did not believe the proposals would achieve the EU's stated aim of encouraging telecom operators to plough money into better networks.

"Right now, it seems that the most important chapters in this proposal are not going to lead to more investment or long-term growth," said Viktor Wallstrom, a spokesman for Nordic operator Tele2 <TEL2b. ST>.

The debate on the reforms faces a tight legislative calendar ahead of EU elections next May. Most EU laws take up to two years to adopt so Parliament may not have enough time.

On Thursday, Kroes urged the need for speed.

"Failure to implement this package would mean a delay of two and a half years... I can assure you with certainty that Europe would lose the global race," said Kroes.

Her spokesman added that telcos concerned about changes to the package should work with Kroes to ensure passage by Parliament and states.

The European telecom index <. SXKP> was up 0.5 percent at 1626 GMT, and is up 18.6 percent year to date, compared with a 11.7 percent gain in the FTSE 100 <. FTSE> and outperforming sectors like utilities, pharma and oil and gas.

PRESSURES

Europe's telecom sector has seen falling revenues in recent years partly due to competition from low-cost upstarts and new Internet players. Sales are seen to decline between 0.5 to 2 percent a year to 2020, according to a report by Boston Consulting Group for telecom lobby ETNO, opening up an investment gap of more than 100 billion euros.

The pressures have triggered consolidation that could reshape big markets such as Germany, where Telefonica <TEF. MC> wants to buy a rival, subject to anti-trust regulation.

Telecom groups have lobbied for the current regulatory reboot to allow more deal-making to help companies invest more in networks. But such measures were not included since they are handled by EU competition authorities, not Kroes' office.

"The objectives we supported at the outset were fostering a single European market, spurring network investment, and paving the way for more consolidation," said a second executive at a major operator, who also declined to be named.

"Instead we got a plan that will hit margins, a raft of consumer-friendly measures, and nothing on mergers or levelling the playing field with Internet groups like Google and Skype."

Bruno Lippens, a portfolio manager at Pictet Asset Management, said it was difficult to assess the plan's effects.

"I am a bit worried that you get the stick first, meaning that the regulation will shave off earnings expectation for 2014 and 2015. And then the carrot - on consolidation for example - is a few years away and uncertain."

Some investors were more sanguine and the majority view among analysts was that it could have been worse for operators.

"We think that the process of market repair is now underway that will lift the entire telecoms sector, promote the network investment that Europe's economy desperately needs, and power lower unit prices for customers," HSBC analysts wrote.

(Additional reporting by Danilo Masoni, Simon Johnson, and Kate Holton; Editing by Anthony Barker)

About News.net

Publishing Services International Limited (PSIL) is the publisher and operator of a worldwide network of online news sites dedicated to delivering fair, accurate and relevant reporting from a variety of the world’s most trusted sources – from the biggest cities to the smallest towns.

We deliver positive and powerful messages to our readers, providing up‑to‑the‑second news that matters to the individual.

Our promise is to serve communities and individuals worldwide, delivering information that hasn’t always been available to them. We will give them back a voice – a voice that’s empowering because it is theirs – and provide a platform to communicate between themselves and the world.

We believe people are not just generic demographics; they are individuals with their own preferences and curiosities. We are about understanding these individuals, listening to them, and serving them.

We are the new pioneering spirit of news – we’re not talking to everyone, we’re talking with every one.

If you want your news, your voice, your way, on your time – we’ve got news for you.

 

FAQs

Email

If you have any questions or concerns please email us on support@news.net

Phone

  • Australia, Toll Free 1-800-983-421
  • Hong Kong, Toll Free 800-906-187
  • Singapore, Toll Free 800-852-3871
  • USA/Canada, Toll Free 1-800-830-4132

Advertise With Us

Interested in being awesome?
Contact us by email or phone.

Cancel