European telco revenues drop as price wars heat up

Wed May 8, 2013 6:20am EDT
Email This Article |
Share This Article
  • Facebook
  • LinkedIn
  • Twitter
| Print This Article | Single Page
[-] Text [+]

By Harro Ten Wolde and Clare Kane

FRANKFURT/MADRID (Reuters) - Two of Europe's biggest telecom operators reported lower revenues on Wednesday, blaming the weak European economy and stiff regulation while seeing some bright spots in markets abroad.

The figures from Spain's Telefonica SA (TEF.MC: Quote) and Deutsche Telekom AG (DTEGn.DE: Quote) chimed with recent statements from peers such as France Telecom FTE.PA, Swisscom SCMN.VX and KPN (KPN.AS: Quote) as European operators struggle with an overcrowded market, tough regulations and recession.

They complain such pressures are hampering their ability to invest in faster networks, important for future growth.

Telefonica, Europe's biggest telecom group by revenue, reported a 11.7 percent drop to 6.7 billion euros ($8.8 billion) for its European operations in the first quarter, with total revenue down 9 percent at 14.1 billion.

Deutsche Telekom said revenue in Europe shrank 6.9 percent to 3.33 billion euros, while overall revenue fell 4.5 percent to 13.8 billion.

Reflecting the pressures the sector is under, European telecom stocks are much lower valued than U.S. peers and trade at roughly 11 times prospective earnings against 19 times for U.S. peers, according to Reuters data.

Telefonica shares were down 1.4 percent by 0925 GMT, the biggest decliner in a flat European telecom sector , dragged down by an increase in its debt despite being on a debt-cutting drive, as well as a weaker-than-expected performance in Spain.

Telefonica aims to cut debt to less than 47 billion euros by year end but reported net debt of 51.8 billion at end-March, against 51.3 billion three months earlier. The company has sold all its treasury stock and 40 percent of its central American businesses to slash debt this year.   Continued...

Reflections are seen on a logo of Spain's telecommunications giant Telefonica in Madrid December 3, 2012. REUTERS/Andrea Comas