A growing demand for broadband and higher consumer spending is set to drive revenue growth of 1-2 percent in the EMEA telco sector in 2017, Moody’s has forecast.
The credit rating company said that the launch of fibre services for which consumers are willing to pay more was one of the factors that will “underpin” European operators’ return to revenue growth next year.
Deutsche Telekom, Telefónica and Orange were all identified as companies that have increased capex in order to differentiate their service offerings.
In Spain, Telefónica is offering premium packages at a higher price, which drove ARPU up from €68.80/month in Q1 to €71.80 per month in the three month to June.
In Germany, positive ARPU is expected from Deutsche Telekom as a result of increased data allowances and speeds for “premium” customers.
The operator saw sales rise 2.1 percent in its home market in the second quarter.
Moody’s said it expected the same trend to appear in other markets where telcos are implementing similar strategies.
The outlook is not as bright in Russia, however, which continues to be rocked by currency woes.
Moody’s said that the “Big Three” Russian telcos - namely MTS, MegaFon and VimpelCom - all faced hits to profitability resulting from of the ongoing “economic crisis” in the region.
VimpelCom has been particularly hard-hit in recent months, with revenues nosediving by over a quarter in the three months to June.
Meanwhile, African, Middle East and Turkish telecom markets were given a stable outlook, with Moody’s forecasting low single-digit revenue growth over the next 12-18 months.
While the past 12 months have been a hive of M&A activity, Moody’s said that the outlook for Europe going forward was uncertain as regulators take up a guarded stance toward consolidation.
It added that any M&A activity - most likely to occur in France, Italy, Denmark, Poland, Sweden and Spain - will largely be focused on strengthening telcos’ current presence and would not be made on a debt-funded basis, which could hit credit ratings.
Moody’s SVP Carlos Winzer said: “Europe’s telecoms regulator is balancing its historic focus on lowering prices for consumers with greater flexibility for companies to earn an adequate return on the investment made in their networks.
“However, competition authorities seem to have toughen their stance so in-market consolidation approval are less certain.”