European telecoms firms see return to growth in 2016

By Julia Fioretti

BRUSSELS (Reuters) - Europe's telecoms industry is forecast to return to growth in 2016 after six years of revenue declines, partly in response to consolidation and expansion in fixed broadband sales, a European industry body said in its annual report.

The European Telecoms Network Operators' Association (ETNO), whose members include Telefonica, Orange and Deutsche Telekom, made these predictions in the report, which will be published on Thursday.

Europe's main telecoms companies have had falling revenues since 2009, largely the result of price competition and regulatory-driven cuts to roaming charges and mobile call termination rates, fees operators charge for carrying each other's traffic.

Revenues for telecoms firms dropped 4 percent in 2013, according to the report, and are forecast to fare slightly better in 2014, dipping 1.8 percent instead.

A more favourable regulatory outlook and growth in fixed broadband revenues contributed to the brighter forecasts.

A wave of consolidation among telecom and cable companies is also expected to blunt competition and raise prices in some markets such as Germany and Ireland.

"The end of the slump is close, but regulations need to change," Luigi Gambardella, an ETNO executive board chairman, said.

The report is being published six weeks after a new European Union executive team that will review Europe's telecoms regulatory framework took office.

Last month, senior executives at Europe's telecoms firms painted a rosier picture for 2015 at an investor conference in Barcelona, crediting the rising demand for 4G mobile broadband that enables people on the move to watch TV and surf the web.

"There are signals that the glass may have ultimately been half-full rather than half-empty in 2014," the ETNO report said.

But ETNO also said sustained revenue recovery would come only if EU regulators acted to curb the power of big Internet firms competing with telecoms operators.

The growth of voice and messaging services delivered over an Internet connection, such as Skype and WhatsApp, has eaten into operators' revenues. As a result, the telecoms groups have called for a friendlier regulatory framework to help them shoulder the burden of investing in faster networks.

The European telecom stock index has risen 4 percent this year, lagging double-digit rises in the food and beverage and utilities sectors but outpacing oil and gas and retail.

(Reporting by Julia Fioretti. Editing by Jane Merriman)