The material on this site is for financial institutions, professional investors and their professional advisers. It is for information only. Please read our Terms & Conditions, Privacy Policy and Cookies before using this site.

All material subject to strictly enforced copyright laws. © 2021 Euromoney, a part of the Euromoney Institutional Investor PLC.

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.

Time is running out for Europe's telecom companies. Investors don't believe they can meet debt-reduction targets, nor do research analysts or the rating agencies, which are threatening further downgrades. Even the companies' own management teams are starting to have doubts about the tenability of widely publicized restructuring plans, admitting that perhaps they've been a little optimistic.


During the past year, telecom companies have slid a long, long way into the red. Between them, the main incumbents - the former state-owned companies - have run up a bill of e150 billion ($137 billion) bidding for universal mobile telecommunications system (UMTS) licences. They've also been having "fun and games on the side", in the words of one analyst, acquiring competitors and buying stakes in others.


But now the fun has stopped as the telecom companies have started to realize exactly what they've got themselves into. Before they see a single euro of return on their UMTS licence outlay, they have to spend roughly the same again in rolling out the infrastructure necessary to support third-generation (3G) mobile communications. "Capex needs are extremely high in the coming years," says Bradley Bugg, telecom credit analyst at Dresdner Kleinwort Wasserstein, who estimates that another e150 billion of spending on UMTS will be necessary before the network becomes operational.



You have reached premium content. Please log in to continue reading.

Read beyond the headlines with Euromoney

For over 50 years, our readers have looked to Euromoney to stay informed about the issues that matter in the international banking and financial markets. Find out more about our different levels of access below.

SUBSCRIBE ONLINE TODAY

Unlimited access to Euromoney.com and Asiamoney.com

Expert comment, long reads and in-depth analysis interviews with senior finance professionals

Access the results of our market-leading annual surveys across core financial services

Access the results of our annual awards, including the world-renowned Awards for Excellence

Your print copy of Euromoney magazine delivered monthly

£73.75 per month

Billed Annually

FREE 7 DAY TRIAL

Unlimited access to Euromoney.com and Asiamoney.com, including our top stories, long reads, expert analysis, and the results of our annual surveys and awards

Sign up to any of our newsletters, curated by our editors

LOGIN NOW

Already a user?

We use cookies to provide a personalized site experience.
By continuing to use & browse the site you agree to our Privacy Policy.
I agree