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Summary

Ovum's annual analysis of the European wholesale telecoms market shows that wholesale revenues in Europe declined just 0.3% to $46.5bn between 2012 and 2013. The continued commoditization of wholesale voice services depressed revenues. However, revenues from the fixed non-voice sector rose, leaving total fixed wholesale revenues unchanged. For the first time we are seeing non-voice revenues offset the declines in voice, but wholesalers must still do more to counter the continuing decline in wholesale voice revenues by improving their portfolios of higher-margin, non-voice services.

Direct link between dependence on wholesale voice revenues and overall wholesale revenue decline

By analyzing the published results of the leading 30 players in the European wholesale market we identified several important correlations. We discovered that the former incumbent telcos most dependent on revenues from wholesale voice services, particularly in their national markets, experienced the largest falls in their overall European wholesale revenues. In contrast, carriers that have put effort into growing their portfolios of non-voice services (ranging from base station backhaul and fiber access, to content distribution and cloud services) recorded the greatest increases in total European wholesale revenues.

BT again had the largest share of the European wholesale market and exemplifies the challenge facing Europe’s largest wholesalers. Significant falls in its national wholesale voice revenues more than outweighed improvements in its international voice, national and international non-voice revenues, resulting in an overall fall in its European wholesale revenues. BT has developed a strong non-voice portfolio but still needs to do more.

The decline in revenues from wholesale voice services shows no sign of relenting. Since our first analysis of the European wholesale market in 2003, revenues in the fixed voice sector have declined from 63% of the total fixed market to just 35% in 2013. The decrease was particularly acute in national voice revenues, which shrank from 39% of the total in 2003 to 18% in 2013.

Wholesalers must lessen their dependence on traditional wholesale fixed voice sales by meeting customers' needs for non-voice services. The non-voice arena offers greater opportunities for innovation and differentiation than voice services have. Wholesalers must take action to understand and satisfy customers’ developing requirements for non-voice services, and should encourage them to migrate away from commodity services to differentiable value-added services.

Appendix

Further reading

European Wholesale Market Share 2012–13: The Big Picture, TE0012-0005152 (March 2015)

European Wholesale Market Share 2012–13: The Detail, TE0012-000522 (April 2015)

Author

David James, Principal Analyst, Wholesale Telecoms

david.james@ovum.com

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