Analysis: Europe's telcos in slow lane as cable takes the tape

Tue Nov 27, 2012 9:05am EST
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By Leila Abboud and Kate Holton

PARIS/LONDON (Reuters) - Far from fearing the coming investment from Europe's telecom giants into superfast broadband, smaller cable firms believe they will still beat the big guns to the trigger.

Cable operators Liberty Global, Ziggo, Kabel Deutschland and Virgin Media have already stolen a march on their less nimble rivals, winning customers and investors with their expansion into broadband.

Their cable lines, designed to deliver TV to homes, have been upgraded to carry voice calls and Internet at speeds often five times faster than competing services from the telcos.

Now telecoms groups such as Deutsche Telekom and KPN have to play catch-up.

But after a third year of falling revenue, their stretched balance sheets will struggle to find the hundreds of billions of euros they need over the next decade to connect European homes to fiber broadband, which can deliver speeds of 30-100 megabits per second.

Unlike the cable companies, the telecoms providers, many of the former national monopolies, have been saddled with tight regulation of their tariffs and legacy business in terminal decline.

Fixed telephone revenue fell 8.3 percent last year as more people got rid of home lines, while mobile revenue fell 0.6 percent as data sales failed to make up for lower voice prices, according to telco lobby ETNO.

With dwindling cash flows and high debt, they are already struggling to keep up the high dividends that have been their single biggest attraction to investors. Some, like Spain's Telefonica, have been selling assets and cutting their payouts to shareholders.   Continued...