Telecom operators Deutsche Telekom and Orange’s latest results were negatively impacted by tough competition on fixed as well as mobile networks, but cost cuts and mobile data partly helped of offset that.
Deutsche Telekom and Orange both reported their fourth quarter and full year results, ending Dec. 31, on Thursday.
For the fourth quarter, the German operator reported net sales of €15.67 billion (US$21.51 billion), up 6.5 percent year on year, and a net loss of €752 million, down from a €641 million profit a year earlier.
Revenue for the full year was up 3.4 percent to €60.13 billion and a €5.35 billion loss was turned into a €930 million net profit. The 2012 loss was the result of “special factors,” in particular an impairment charge from the merger of Deutsche Telekom-owned T-Mobile US and MetroPCS.
Orange’s fourth quarter revenue was €10.22 billion, down 6.4 percent. Orange didn’t report on its net loss or profit for the fourth quarter. For the full year, the French operator reported sales of €40.98 billion, down 5.8 percent, and a net profit of €2.13 billion, compared to a €1.1 billion profit in 2012. Cost cuts helped improve the results.
Mobile data revenue remains one of the driving forces in mobile communications. Mobile data revenue increased by 30.1 percent in the fourth quarter of 2013 compared with the same period in 2012, according to Deutsche Telekom.
Investments in fiber and 4G have proved successful, with “excellent commercial results in terms of both volume and value, particularly in France,” said Orange without offering much detail.
At the same time, the two telecom companies also faced very competitive environments. This was especially true for Orange, thanks to its home market having become one of the most competitive in Europe. In France, Orange’s average revenue per user from mobile services declined 11.5 percent during 2013. That’s bad news for the operator, since about half of its total revenue comes from the French market.
The French telecom market is currently in a state of flux. Vivendi has received two bids for SFR, France’s second largest operator, including one from third largest operator Bouygues, which if it resulted in a deal would decrease the number of operators in France from four to three.
The French operators had things their own way for a long time, experiencing some of the highest spending rates per customer in Europe, but that changed in 2012 when Free entered the market with its own mobile network, according to Kester Mann, analyst at CCS Insight.
“There is no hiding away from how Free has impacted the market … The major hurdle for a deal with Bouygues will be regulation, and will it be approved by competitive authorities,” Mann said.
Any type of consolidation could mean less competition, which would be good for Orange and SFR-Bouygues, but possibly less beneficial for users.
“Naturally a move from four operators to three is going to ease things somewhat, but I don’t think it will necessarily mean prices will creep up. There is still a very competitive player in Free,” Mann said.