Detecon Study Impact of the Financial Crisis on the European Telecommunications Industry: Results of...

8/8/2019 Detecon Study Impact of the Financial Crisis on the European Telecommunications Industry: Results of the Detecon

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> Study

Impact of the Financial Crisis on the

European Telecommunications Industry

Results of the Detecon Survey 2009 / 2

www.detecon.com


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This publication or parts there of may only be reproduced or copied with the prior written

permission of the publishers.

Published by Detecon International GmbHFrankfurter Strae 27, D-65760 Eschborn

www.detecon.com


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Results of the Detecon Survey Study Study Results of the Detecon Survey

Detecon International GmbH4

3. Methodology

Each interviewee was asked to estimate ten statements related to the financial crisis. Interviews were con-

ducted either by phone or in one-to-one meetings. Of those interviewed, 48% came from fixed l ine carriers,

25% from mobile carriers, 14% from fixed + mobile carriers and 13% from other telecommunications-relatedcompanies (e.g. consulting, banking, vendors). The interviewees included 35% Executives, 50% Line Ma-

nagers and 15% Professionals. The responses of the interviewees were grouped into three regions in order

to take into consideration the different market environments. The regional grouping was done as follows:

Region West (Belgium, France, Germany, Luxembourg, Norway, Spain, and UK), Region East (Belarus,

Bulgaria, Czech Republic, Hungary, Romania, Russia, Slovakia, Ukraine, Uzbekistan) and Region South

(Croatia, Greece, Turkey).

Statement 1:

I agree that my main operating market is already impacted by the financial crunch / crisis.

The majority of interviewees agree that the financial crisis has already impacted their main operating mar-

kets. However, the regional breakdown shows that interviewees from the Region East expect their markets

to be more adversely affected compared to those in Region West or South, which could also suggest that

the level of uncertainty about the future market developments are much higher in the East. Most respon-

dents from that region made side comments that it is very difficult to estimate how the overall economy will

be further impacted by the financial crisis in 2009 and 2010 and how strongly the spill-over effects on the

telecommunications sector will be.

2

10

2

10

4

1

0 5 10 15 20 25 30

East

SouthNo comment 0

West

3Neither agree nor disagree

2

Disagree very much

4Disagree

0

11Strongly agree

312Agree

1

Number of respondents


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Statement 4:

I agree that the current crisis will bring a price war into our market.

3

3

12

8

3

0 5 10 15 20 25 30

2 0

0

No comment

West

South

East

1Strongly agree

13Agree


37Disagree

Disagree very much

0


Most respondents are unsure whether a price war is looming or disagree entirely. Although it seems to us

that consumers become more price conscious, no data could yet be found that would show operators ente-

ring into a pricing war beyond the usual market behavior. Instead, in some countries, like Germany, other-

wise strong competitors are actually thinking of collaborating more intensively in the joint roll-out and use of

new network infrastructure which suggest that operators are jointly trying to find solutions to avoid negative

backlashes of the financial crisis.

Statement 5:

I agree that the current crisis will force us to take measures to stabilize our revenues.

4

9

3

0

13

0 5 10 15 20 25 30

12Strongly agree

412Agree


01Disagree

0

Disagree very much

4No comment

West

South

East


Most respondents expect their companies to take revenue stabilization measures in 2009 in order to avoid

the negative fall-out from the crisis. However, nearly 30% of all respondents chose not to give any hints as

to whether and how they might be reacting.


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Although nearly half of the respondents believed that a lack of liquidity in the market might become a pro-

blem for their main operating markets, the great majority of respondents does not expect this problem to

threaten their own growth. However, the result of this question is different when comparing the answers by

work function.

Most respondents working in a Finance Department saw the access to affordable liquidity as a key concern

for sustainable growth, which could suggest that the financial impact of the crisis to cash flows and profit and

loss are not yet fully understood or agreed to by all functions in the business in the same way.

Due to great uncertainty in the general economic development, Eastern European operators seem to be

particularly careful when it comes to capital expenditures and have also publicly announced the postpone-

ment or cancellation of major infrastructure projects4

.

Statement 8:

I agree that that lacking liquidity in the market is a problem for the telco industry in our main

operating market.

5

6

9

7

2

0 5 10 15 20 25 30

1 0

11Strongly agree

39Agree


23Disagree

Disagree very much

0No comment

West

South

East


The opinion of respondents is divided on whether the lacking liquidity is a problem to main operating mar-

kets. Roughly 45% believe that it is not, the other 45% are not sure or disagree. This sentiment is shared by

all three regions.

Statement 9:

I agree that lacking liquidity will prohibit our company from growing further in 2009.

4) E.g. IHS Global Insight, 29.12.2008, Svyazinvest Halves 2009 Investment Programme, Pledges Not to Cut Jobs

2

6

10

5

4

2

0 5 10 15 20 25 30

1

0Strongly agree

12Agree


46Disagree

11Disagree very much

1No comment

West

South

East



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4. Conclusion

Based on the results of this survey, major concerns of telecommunications operators are to:

forecast the spill-over effects of the general economic development on the telecommunications sector

and to get ahigher level of certainty for planning and budgeting.

if and how to more closely collaborate within the telecommunications industry to jointly work

against the negative impacts of the crisis.

Most respondents expect the demand in the business segmentto decrease due to redundancies and

tighter expense management measures currently being implemented by large business accounts.

adjust OPEX (especially personnel related cost) to lower revenue growth for the coming two years.

identify and prioritize those investment areas that will bring the highest positive returns in the

long run and to more closely monitor actual performance of project implementation.

Surely, not all operators are in exactly the same situation or share the same concerns. Currently, it seems

that Western European respondents acknowledge more the negative impacts and are more prepared to take

serious actions in 2009 whereas in Eastern and Southern Europe a number of respondents are still unclear

as to what to expect from 2009 and how to respond.

Our point of view is that operators in all regions are well advised to seriously think what the challenges

in 2009 onwards could be and how best to deal with them. Detecons project experience shows that

operators that identify the strategic challenges, build adequate contingency plans, create a company wide

awareness for these issues and take conscious decisions are usually also those to come out first from any

crisis and mostly even stronger.

From what we have seen in recent years in many European operator projects, especially in Eastern and

Southern Europe, there is a significant potential to increase profit and cash flow by optimizing in-

ternal efficiencies (e.g. compare FTE/lines or active SIM cards as a basis or EBITDA/FTE). For these

operators, the obvious next step might be to push through structural efficiency improvements in order to

strengthen operating cash flows in the long-run. The pretext of the financial crisis might be a good faci-

litatorfor Executives to find enough support to successfully execute decisive actions. Those operators who

have already set-up efficiency programs need to accelerate the execution and robustness of the programs

in order to achieve the maximum potential.

On the other side, some operators are already reaching an efficiency level beyond which further improve-

ments become increasingly costly to achieve. For them to continue to focus on internal optimization would

be a waste of resource. Instead, these operators might want to think more about how they can use the

operating weaknesses of the other players in order to change the market place to their advantage, for

instance, by acquiring smaller players, forming new alliances, investing in new coverage areas or simply

investing in a new blue ocean strategy within their home market. No matter what the answer might be, the

idea is the same: outrun your competitors while they are busy with operational restructuring.

The challenges and possible solutions can be quite different for every operator. Betting on the wrong sce-

nario can become a costly mistake. To avoid these mistakes, Detecon recommends the following steps tothose operators that are still struggling to decide on how to respond to the crisis:


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5. The Company

Detecon International GmbH

Detecon International is a leading worldwide company for integrated management and technology consul-

ting founded in 2002 from the merger of consulting firms DETECON and Diebold. Based on its comprehen-

sive expertise in information and communication technology (ICT), Detecon provides consulting services

to customers from all key industries. The companys focus is on the development of new business models,

optimization of existing strategies and increase of corporate efficiency through strategy, organization and

process improvements. This combined with Detecons exceptional technological expertise enables us to

provide consulting services along our customers entire value-added chain.. The industry know-how of our

consultants and the knowledge we have gained from successful management and ICT projects in over 100

countries forms the foundation of our services. Detecon is a subsidiary of T-Systems, the business custo-

mers brand of Deutsche Telekom.

Integrated Management and Technology Competence

We possess an excellent capability to translate our technological expertise and comprehensive industry and

procedural knowledge into concrete strategies and solutions. From analysis to design and implementation,

we use integrated, systematic and customer-oriented consulting approaches. These entail, among other

things, the evaluation of core competencies, modular design of services, value-oriented client management

and the development of efficient structures in order to be able to distinguish oneself on the market with inno-

vative products. All of this makes companies in the global era more flexible and faster at lower costs.

Detecon offers both horizontal services that are oriented towards all industries and can entail architecture,

marketing or purchasing strategies, for example, as well as vertical consulting services that presuppose

extensive industry knowledge. Detecons particular strength in the ICT industry is documented by numerousdomestic and international projects for telecommunications providers, mobile operators and regulatory aut-

horities that focused on the development of networks and markets, evaluation of technologies and standards

or support during the merger and acquisition process.

For further information please contact:

Carsten Schrder

Managing Partner Corporate Finance

Mobile: 0049 175 932 3583

eMail: [email protected]

Christian Barte

Team Leader Performance Engineering

Mobile: 0049 160 989 42969

eMail: [email protected]


Oberkasselerstr. 2

53227 Bonn

Internet: www.detecon.com


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Oberkasseler Strae 253227 Bonn

[email protected]

www.detecon.com

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