Europe’s telecom market needs further deregulation to halt...

Kearney said. The financial state of European telecom companies lags behind that at all other major regions of the world but could generate an additional 40 billion euros ($53 billion) by 2020 with the right policies in place, it said. But if nothing is done, the sector could be 50 billion euros smaller by the end of the decade, it said. The main problem is that the decline in voice revenues isn’t being offset by growth in broadband access charges, it said. Traditional revenue sources are essentially being replaced by lower-priced services that benefit consumers and spur volume but cost operators. Regulatory price cuts on termination charges and mobile roaming fees are also taking a toll, although the entry of over-the-top players with VoIP and messaging applications that are free at the point of usage has a bigger impact, it said. But it’s industry’s own price structures, particularly flat rate or unlimited service bundles, and customers’ efforts to lower their monthly bills, that have the biggest effect on core revenue decline, it said. But there are many opportunities for growth. A value-based pricing model that considers value as consumers’ willingness to pay would help customers as well as operators, it said. Some tariffs already contain elements of a range of factors, including access speed, quality or connection time, although the fixed-fee component is almost always a high proportion of the total. If operators innovated in this area, they could offer services to “underserved” segments while getting more value from the services they offer heavy users, it said. The study assessed five key opportunities for new or adjacent markets: payments, mobile advertising, machine-to-machine communications, Internet Protocol TV and cloud computing. There’s a wide range of opinion about how addressable these opportunities are, with the biggest question being how much value-add operators can sell and deliver, it said. Given the uncertainty of the returns, “operators will need to enter with confidence and sufficient ambition to compete with experienced global players,” it said. They should also consider more radical cost-improvement measures such as transforming information technology platforms and increasing automation while phasing out legacy systems; integrating multinational groups across borders to achieve efficiencies; extending network-sharing agreements to cover full, active radio access network sharing; and further consolidating operators within countries. The EU regulatory framework can help boost the sector’s revenue by giving operators more pricing flexibility and fewer price caps, the report said. Competing with global players also requires symmetric regulation of all value chain players and possibly lighter-touch competition law, it said. Further consolidation must be allowed, it said. The report recommended that national and EU regulators focus on giving operators “three freedoms": (1) To develop retail pricing proposals that are customer-centric and unconstrained by rules on bundling. (2) To innovate on the same terms as non-telecom operators. (3) To pursue scale in operations, in-country and across borders.