Global Insight Perspective | |
Significance | France Telecom has suggested that the EU's plan to clamp down on mobile roaming charges could force operators to turn to Asian telecoms vendors for supplies. |
Implications | If the threat is actualised, the resulting impact on Europe's leading telecoms equipment makers will reverberate across the region, with job and revenue losses and potentially causing further anxiety among the populace of the emergence of Asian economic stalwarts. |
Outlook | In the light of ongoing threats, negotiations and criticisms, EU politicians are likely to favour a less dramatic clampdown on roaming charges. |
France Telecom has warned that the European Union (EU)'s proposed clampdown on mobile roaming charges would put thousands of European jobs at risk. In a report published by the Financial Times on 14 December, France Telecom's chief executive officer, Didier Lombard, suggested that Europe's mobile operators may turn to cheaper Asian vendors for telecoms equipment in order to offset the expected fall in revenue from the EU's proposed clampdown on roaming charges. "We will adapt to the situation, which means the telecoms sector as a whole will suffer," Lombard warned." All the European manufacturers will be affected.
Meanwhile, France Telecom has pledged to invest 270 million euro (US$253.8 million) over two years to roll out FTTx. The company said it will launch the first phase of its FTTx service in France in 2007, with a target of 150,000 to 200,000 customers by the end of 2008. Lombard also hinted that the company would not pursue "broad-based" IT groups like Atos Origin and Capgemini, insisting that the company was content with its acquisition of telecoms-related IT companies Diwan, Neocles and Silicomp.
Outlook and Implications
Honest Admission or Threat: France Telecom's suggestion offers the clearest insight yet as to how European mobile operators may react to the proposed cuts on mobile roaming charges. Although estimates vary, operators are likely to lose at least 5 billion euro if the roaming price cuts go ahead—how to recoup that loss is top on the agenda of Europe's operators. Several parties, including the GSM Association, have warned that a forced reduction in the roaming charges amounts to heavy-handedness and is tantamount to a distortion of the market. Viviane Reding, the EU telecoms commissioner, has, however, rejected such claims, insisting that companies have had time to reduce their charges but have failed to do so. As the likelihood of a clampdown grew, France Telecom and Vodafone last week asked the EU to let mobile operators reduce costs voluntarily. The admission that operators may have to resort to such drastic measures as favouring Asian suppliers may be the last option in the hands of the operators to force the EU to rethink its plans to slash mobile roaming charges (see Europe: 13 December 2006: Vodafone, France Telecom Seek to Limit Mobile Roaming Fees Cap , 13 July 2006: No Reprieve for EU's Revised Plan to Slash Mobile Roaming Fees , 5 July 2006: EU Divided over Plans to Cut Mobile Roaming Charges, 12 May 2006: National Regulators Object to EU Roaming Plans, 1 May 2006: Mobile Operators Up in Arms Over EU's Roaming Charge Cuts, 29 March 2006: EU Forces Down Mobile Roaming Charges and 23 March 2006: GSMA Criticises EU's Roaming Fee Plans).
Breeding a Dilemma: France Telecom has—whether knowingly or unwittingly—posed a dilemma to EU politicians and citizens in general by suggesting that contracts may go to cheaper suppliers in Asia. In a nutshell, the company is asking EU citizens to either pay more to roam with their mobiles or risk ceding the initiative in the telecoms equipment market to Asia. The prospect of Europe's leading vendors—Nokia, Ericsson, Siemens and Alcatel—losing market share in their traditional home turf to the likes of Huawei and ZTE of China ,or Samsung and LG of South Korea, would have dire implications on the European telecoms sector. Apart from the thousands that are directly employed in the sector, many of the top companies are national stalwarts that contribute hugely to national economic survival—e.g., Nokia in Finland. In the light of this, and with growing European public concerns about the emergence of China and India, coupled with the implications on the European welfare state of a widespread decline in the sector, EU politicians may be less inclined to push through a radical reduction in roaming charges (see Europe: 14 December 2006: Incumbent European Telcos Take Swipe at New EU Rules).