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European Telecom Markets

While population increases across Europe mean that there is a steady influx of new mobile subscribers, the market has a sufficiently high penetration rate that growth is largely lateral, in that subscribers are migrating from 2G to 3G and LTE networks. As a result, the proportion of 2G subscribers is falling sharply, and while there remains steady, if slow, growth in the 3G sector this will also begin to fall from late 2017 or 2018 as subscribers shift to LTE networks.

This movement is being encouraged by network operators which hope to capitalise on revenue derived from greater take-up of mobile broadband and data services. This sector will be the main area for revenue growth in coming years: voice and basic data services are no longer the cash-cows of former times, attributed in part to the large number of minutes and messages included in bundles, as also to the fast-growing adoption among subscribers of OTT voice and data services. This has resulted in lower SMS traffic for MNOs, and consequently lower revenue. These market conditions are exacerbated by ongoing regulatory measures aimed at reducing termination rates and roaming charges. After many years in which roaming charges were reduced incrementally, the European Commission (EC) has mandated that international roaming charges will end in June 2017. Customers will thereafter be charged at domestic roaming rates only.

Price pressure continues from market competition. This is less prevalent from among MVNOs, which tend to be focussed on niche markets, have a relatively small subscriber base and (often) disadvantageous conditions imposed by their host networks. As with Latin America and Africa, the region is notable for having half a dozen pan-European operators with interests in several key markets. These main players include Deutsche Telekom, Telefónica, Vodafone Group, Hutchison and TeliaSonera. There has been much jostling among these operators as they seek to strengthen their presence in particular markets. This has in turn caused some disquiet among national regulators and European competition authorities, which are keen to preserve a quorum of key players (generally four) within a given market. It was in the interest of maintaining effective competition that the proposed sale of O2 UK to Hutchison was opposed, since this would have reduced the number of MNOs to three. Regulators are mindful that reduced market competition could jeopardise operator investment in network infrastructure and upgrades at a time when the EC is pushing for universal 100MB/s broadband availability. This goal can only be achieved through the deployment of improved LTE networks and the adoption of networks based on the forthcoming 5G standard, both of which require further investment among operators.

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