European Telecos Under Pressure as Slow 4G Adoption Leads to Price Cuts (FTE) (VOD)
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The same fervor with 4G LTE expansion experienced in the U.S. isn't quite the same in Europe and telecom companies are suffering a little as a result.
To reverse 4G apathy, some companies like Deutsche Telekom, France Telecom (NYSE: FTE), and Vodafone (Nasdaq: VOD) are trimming rates, some by as much as 25 percent.
Executives at Vodafone and France Telecom have been aiming to reverse years of sliding prices with the introduction of 4G. That initiative has been largely met with flat response. While U.S. wireless bills rose from $41 to about $50 per month over the last five years, European bills have shrank from $41 down to $32 over the same period.
Bloomberg-compiled data show that capital expenditures at the largest telecoms in Europe will rise 6.8 percent, which will be magnified by the expected 2.8 percent drop in revs for the same period.
One area of concern is offering discounts too early, the same mistake that carriers in Europe did with the advent of 3G technology. One analyst from S&P Capital said it would be tough to charge a premium for 4G when 3G is still being offered at a discount.
Deutsche Telekom is said to have just about 410,000 users on its 4G network since offering the service last March. The firm has a total of about 35 million subscribers, meaning 4G still counts for a small percentage of the whole.
Along with stocks named above, companies like Spain's Telefonica (NYSE: TEF), Telecom Italia (NYSE: TI), and Portugal Telecom (NYSE: PT) may be facing similar pressures in their respective markets. All of the stocks are trading lower on the session.
To reverse 4G apathy, some companies like Deutsche Telekom, France Telecom (NYSE: FTE), and Vodafone (Nasdaq: VOD) are trimming rates, some by as much as 25 percent.
Executives at Vodafone and France Telecom have been aiming to reverse years of sliding prices with the introduction of 4G. That initiative has been largely met with flat response. While U.S. wireless bills rose from $41 to about $50 per month over the last five years, European bills have shrank from $41 down to $32 over the same period.
Bloomberg-compiled data show that capital expenditures at the largest telecoms in Europe will rise 6.8 percent, which will be magnified by the expected 2.8 percent drop in revs for the same period.
One area of concern is offering discounts too early, the same mistake that carriers in Europe did with the advent of 3G technology. One analyst from S&P Capital said it would be tough to charge a premium for 4G when 3G is still being offered at a discount.
Deutsche Telekom is said to have just about 410,000 users on its 4G network since offering the service last March. The firm has a total of about 35 million subscribers, meaning 4G still counts for a small percentage of the whole.
Along with stocks named above, companies like Spain's Telefonica (NYSE: TEF), Telecom Italia (NYSE: TI), and Portugal Telecom (NYSE: PT) may be facing similar pressures in their respective markets. All of the stocks are trading lower on the session.
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