UK telecommunications market facing further consolidation

London, 12 February 2009 — With total sales in the UK for traditional voice and data services set to fall for the first time, the UK telecommunications market is likely to see an increase in consolidation. According to a new study by strategy consultants Booz & Company, released ahead of the World Mobile Congress in Barcelona, the UK telecommunications market is likely to contract from £33.5 billion in 2008 to £32.5 billion in 2012.

Increasing market saturation and rapidly-falling prices are expected to lead to dramatic shifts in the market and to a wave of consolidations as operators seek to radically reduce costs.

The study notes that over the coming years, the telecommunications sector is set to put sizeable investment into the imminent expansion of glass-fibre networks and the infrastructure for the new LTE (Long Term Evolution) mobile phone standard. At the same time, sales forecasts are down; a reduction of 2.5% by 2012 is forecast for mobile phone and fixed network operators, who have become used to enjoying double-digit rates of growth. Total sales in UK for traditional voice and data services are accordingly set to fall, despite significantly increased volumes being transported over the networks.
 
Michael Peterson, partner in the Communications, Media and Technology practice at Booz & Company, commented: “The sharp recession will act as a catalyst for the necessary market consolidation and structural adjustment in the telecommunications industry. In the crowded broadband market, the smaller providers lacking the necessary scale are the most likely participants.”
 
John Ward, principal, in the Communications, Media and Technology practice at Booz & Company, added: “The only way left for the network operators to realise scale effects is through takeovers, mergers and co-operation. We can expect to see further consolidation of infrastructure assets, through outsourcing, network sharing or integration of fixed and mobile network operations to enable significant cost reduction.”
 
“At the end of the recession, the telecommunications industry will have completely transformed itself,” says Mr. Peterson. “Strong providers with a sound financial base will be able to acquire additional market share and technology in a largely saturated market. We expect the large scale players to be the ultimate winners in the industry.”