Late last week, Neelie Kroes, EU telecoms commissioner, backed down on her
threat to make owners of old-style copper networks – the likes of France
Telecom and Telefónica – lower the price at which they grant access to
smaller rivals unless investment in high-speed fibre networks is stepped up.
Instead, the Dutch politician, who estimates EU broadband investment needs at
€270bn, promised regulatory “stability and consistency”.
Broadband investment
True, she plans stricter rules to ensure equal access to networks. However,
for incumbent telcos, that is like being poked by a twig compared with the
big baton of lower access charges.
In fairness, it was never clear that the threat of reducing the cost of using
copper networks would spur broadband investment – not least because it could
have made it harder to persuade customers to upgrade to fibre. Moreover, as
Ms Kroes noted, broadband investment is going quite well in some countries
where copper network prices are above the EU average.
Prospects
But if telcos’ customers fear that the policy shift is a lobbying triumph –
and smaller operators are understandably cross – investors in the incumbent
operators can only be relieved. Bloomberg’s European telecoms sector index
rose 2.5 per cent last week compared with a flat market overall. Given
telcos’ sorry record this year – only oil and resources stocks have
performed worse – that was welcome respite.
No one should get too excited, though. Sector revenues are under pressure and
investment demands are rising. Admittedly, after a spate of dividend cuts,
valuations have been lowered and the average enterprise value to earnings
ratio is below five. Even so, telcos’ prospects could remain on hold for a
while yet.
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