November 21, 2014 / 2:06 PM / 5 years ago

REFILE-European telecom firms see brighter 2015 after years of pain

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* Fading regulatory impact, 4G help boost revenues

* Vodafone CEO says “music seems good” for industry

* Q3 results saw 21 of 24 European firms beat forecasts-analyst

By Leila Abboud and Danilo Masoni

BARCELONA, Nov 21 (Reuters) - Top executives at Europe’s telecoms firms dared to suggest this week that they might at last be turning a corner after years of declining revenues, as demand rises for 4G mobile broadband, regulatory pressures ease and the industry consolidates.

For the network operators a comparative recovery on revenue next year will come in part simply because the price cuts imposed by regulators on roaming charges and the termination fees operators charge for carrying each other’s traffic is now behind them.

But they are also starting to see the benefit of the billions they spent on the 4G networks that enable people on the move to watch TV and surf the web.

“The music seems good, but let’s see how it plays out. The question remains on if we can monetise 4G as more people get the phones in their hands,” Vodafone’s chief executive Vittorio Colao told investors and industry executives at the annual Morgan Stanley Technology, Media, and Telecoms conference in Barcelona.

Colao said he was confident that operating trends would improve as the group got more of its customers to use 4G, which tended to increase data traffic and hopefully monthly charges.

The world’s second-largest wireless carrier would not just shift customers to 4G for free, instead moving them to higher tariffs for the faster service, he said.

Meanwhile Spain’s Telefonica, which saw a 15 percent drop in revenue in its home market last year, is seeing its strategy of selling bundled fixed and mobile broadband and TV services is beginning to bear fruit.

“The third quarter was significantly better than the second,” Chief Operating Officer Jose Maria Alvarez-Pallete told the conference.

“In 2015, we should go into positive revenue territory,” he added.

CONSOLIDATION

At the same time merger deals such as those already seen in Austria, Germany, Ireland and Spain are reducing the number of operators in national markets, meshing fixed line and mobile networks together as services converge and cutting costs.

Some mergers have also simply taken the immediate heat out of the competition to lift the pressure on prices.

In Austria prices have increased by about 20 percent since the number of mobile network operators was cut from four to three last year with the takeover of Orange Austria by Hutchison Whampoa’s local rival Drei, according to the local regulator.

The newfound optimism has already buoyed the Stoxx Europe 600 European telecoms sector index, which is up 8.2 percent this year against a 5.6 percent rise in the overall market index, and led to several analysts upgrading the sector.

In third-quarter results 21 out of 24 west European telecoms companies beat expectations, according to Kepler Cheveureux Securities analyst Javier Borrachero, a trend which he says in a research note is “totally unprecedented in the last four years.”

Deutsche Telekom, Telenor, Swisscom and Telefonica all actually increased revenues in the quarter while declines at Orange, Vodafone and KPN were shallower than previously.

Morgan Stanley analyst Emmet Kelly now predicts that European mobile service revenues could be flat or even up by a couple of percent next year. They fell by 9 percent in 2013, with declines tapering to 4-5 percent in the third quarter.

Kelly said it was an open question how quickly the top-line would return to actual growth. “A lot will depend on whether there are benefits from in-market consolidation deals,” he said.

And the markets in France, Spain, Italy, and Denmark are all now ripe for dealmaking, said executives at the Barcelona conference.

On Friday shares in Bouygues jumped 4 percent after a Numericable director told the conference it would be interested in acquiring Bouygues Telecom, which would reduce the number of mobile network operators in France to three from four.

Editing by Greg Mahlich/Keith Weir

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