Operators demand EU rethink over crippling roaming costs

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Roaming cuts wipe £42m from EE in H1 – Vodafone Group estimates billion pound losses; Network investment and staff employment could be at risk if roaming rules are unchanged

EE chief executive Olaf Swantee has slammed EU regulators after revealing more than £42 million was wiped from its revenues in just six months – putting jobs and future investment at risk.

His comments were made during an exclusive interview with Mobile News last week – whilst discussing the operator’s half-year results which saw its turnover fall three per cent year-on-year to £3.1 billion.

Swantee highlighted the pressures being placed on UK and European operators – particularly around the EU’s decision to slash  roaming costs in Europe in July (see box out), which has had a significant impact on its revenues.

Vodafone Group has already said the impact on roaming cuts, which will be abolished entirely next year, will wipe around £1 billion from its revenues when the rules come in.

EE’s rivals also saw revenue falls, with Three’s first-half results (ending June 30)  falling three per cent to £974 million, whilst Vodafone saw a fall of 3.2 per cent to £1.5 billion in its Q1 (ending June 30).

Investment
Swantee warned the EU must show greater support: “The EU should stop cutting revenues of the operators and should focus on investment and the health of the industry and supporting it.

“We are bringing jobs back to the UK, 1,000 jobs backup to the end of 2015, and it’s really hard not do that when you have no revenue growth whatsoever.

“It is a problem. Regulation has impacted our revenues and in the first half [of 2014] when they were  less heavy we had a £42 million impact. It’s a big change for us. The industry at the moment needs to invest in 4G and 5G over time. There’s a lot of pressure on us to improve those services all over the country and it’s difficult when revenues fall away.”

Vodafone chief executive Vitorio Colao has also expressed his concerns about EU regulation during a conference call late last month.
Colao suggested smaller players, such as MVNOs, will be the biggest benefactors from the changes, whilst they are put at a financial disadvantage.

“The European Commission needs to decide if it wants big players who can stand up in a world arena vis-a-vis giants in the digital sector or if it wants to continue to play with small non-infrastructure-based resellers,” said Colao.

Disadvantage
Swantee also noted that the UK and the rest of Europe has now fallen behind the US when it comes to network investment. According to analyst firm Strand Consult, the US population coverage for 4G was 93 per cent compared with just 26 per cent in the EU in 2013.

In the UK, Vodafone, O2 and Three only joined EE in offering 4G in the latter half of the year.

Disaster
Strand Consult chief executive John Strand labelled the EU regulations a “disaster”, stating the lack of competition on roaming will continue to slow down Europe’s progress.

“The telecommunications package that the EU wants to put through now creates so much uncertainty that it will make operators hold back on investments. EU regulation has been a disaster, and the biggest loser is society because we live in a world where digital infrastructure is so important.  We are now in a situation where we can run into a digital crisis.”

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