Investors won’t pick up cash calls

The jaws of a trap are closing on Europe’s telecom companies. Credit rating agencies and debt providers will punish them unless they reduce the huge debts they took on to build in new markets. The telecom companies have promised to do this by floating subsidiaries and selling assets. But the very equity investors that encouraged them to leverage up and go for growth won’t buy these now. The banks won’t lend either and more downgrades are likely. The scales have fallen from debt and equity investors’ eyes. Where once stood, solid, dependable, utility-like incumbents, they now see risky, new-economy companies that have bet heavily on unproven technology and have limited access to the funding needed to make it pay. The telecom companies may have to take drastic action in order to survive.