The most established historical operators in Europe, such as Orange and Vodafone as well as Deutsche Telekom or the Dutch KPN, will enjoy a stable and even slight growth in 2025, thanks to the enjoyment of their large investments in fiber optic cabling carried out in the recent years together with a generalized cost savings strategy, according to the report “Telecommunications Outlook in Western Europe for 2025” published by the consulting firm Fitch Ratings this January.
Optimism lies above all in the mobile connection market, in which large companies are expected to maintain their market shares or even improve their performance, while the fixed connection market will be somewhat more volatile due to the efforts of alternative operators to attract clients and expand in the territories, according to the report.
“Most mobile market structures will remain stable or improve, while market structures in the fixed segment in many European markets will remain in flux as alternative fiber providers seek to increase adoption levels and expand their presence,” they say from the consulting firm.
Speaking specifically about fiber, they point out that alternative operators will not have as much room to increase the average income per user during 2025 through price increases, nor to reduce the costs of their operating models, because they are already generally cheap. On the other hand, they will face the challenge of new forms of content visualization, which acquire greater weight in the contracting of services.
Stability in Spain and Portugal
Companies will generally continue to reduce their investments, given that the peak of infrastructure spending occurred in 2022, when much of the 5G and fiber optic network was implemented in Europe. Now, large operators will be able to continue making these investments profitable, especially in Spain and Portugal, countries that are ahead of the United Kingdom and Germany, which continue in an earlier phase of building 5G or high-speed fiber infrastructure.
Although Fitch points to a decrease in revenue from traditional products, they indicate that operators will be able to increase profits due to the growth of new products and services for companies (B2B). New products and services with lower profit margins, but that will acquire greater relevance in the final calculation. Thus, the sector’s organic free cash flow (FCF) is expected to continue improving, also increasing the EBITDA of many operators.
This increase in EBITDA will contribute to increasing the margins of large operators such as Vodafone or Orange, although Fitch does not believe that they will use this capital to enter into large investments in the coming years, due to following a more conservative financial strategy.
Cost savings
In Spain, a recent example of the efforts of operators to reduce costs is that of the joint venture announced this January by MásOrange and Vodafone, through which both operators constitute a joint fiber company, called FibreCo, with which to increase the efficiency of their fiber networks and save costs while reaching more customers and completely ditching old copper pair lines.
At a general level in Europe, the margin to increase the consolidation of the mobile sector after the successful attempts in the United Kingdom and Spain will be limited, says the consultancy, which does see more margin in Italy, although there is no probability of major movements occurring in the next 12 months.
