European telcos to escape US slowdown

Jane Wakefield ZDNet.co.uk

Published: 27 Mar 2001 07:44 BST

The economic slowdown currently hitting America will not have a major impact on European telecoms markets but there will be major consolidation in the broadband market, according to research firm IDC.

In a report published on Monday that assesses the impact of the downturn on European voice, Internet and mobile services IDC concludes that while Europe will not be immune it will not be as drastically affected as some pundits forecast.

In some cases the tightening of belts by many tech firms could have a positive affect on telecoms. In the area of voice, for example, companies scaling back on travel expenses may encourage employees to do more teleconferencing, says the report. But there could be some casualties among smaller broadband DSL players. "The anticipated impact of the economic slowdown in the broadband market is likely to focus on large-scale consolidation," says the report.

While some predict delays and even collapse in the mobile sector, IDC remains optimistic that GPRS services will be rolled out on schedule, although UMTS timetables are likely to slip. "This slippage will be more closely linked to delays in equipment and legislation rather than to the economic status," the report claims.

In fact the more serious threat to mobile revenues is a homegrown one in the shape of the current Foot and Mouth crisis. "The agricultural problems...have the ability to somewhat undermine the farming community in Europe and dramatically affect exports and hence GDP," the report reads. "The slowdown in revenues may affect purse strings of some economies and hoseholds. If this happens, then there may be a slight slowdown in mobile spend, as telecoms services are often the first hit."

IDC concludes there is going to less money to go round. Investors are losing confidence in the global telecom sector and this is having a knock-on effect on telco's value and it is going to become less easy to separate the wheat from the chaff. "This has the effect of making strong companies with sound strategies look weak and enables companies with weak strategies and leaders to hide behind the global economic slowdown."

IDC acknowledges this will have an impact on planned investments and sell-offs, a problem BT is currently wrestling with as it tries to lighten its huge debts.

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