Telecoms in good shape to survive in recession

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Telecoms in good shape to survive in recession

The telecommunications industry is in good shape to survive the current economic slowdown thanks to lessons learnt at the turn of the century says a new report.

The analysis, by PriceWaterhouseCoopers (PWC), found that the industry has kept levels of debt much lower than other sectors, despite a flurry of mergers and acquisitions activity over the last few years.

“Although in terms of deal activity the industry is seeing a return to the recent dark days, on the whole telecoms should stand up against the crippling headwind of the recession,” Gary Taylor, director, PricewaterhouseCoopers said.

“The dot com crash put the industry through its paces and as a result we should see far less distressed debt and insolvencies than other sectors such as banking or retail. Telecoms companies have emerged from the dot com tougher, thanks to tighter balance sheets.”

The position of telecoms is further strengthened by the behaviour of its customers. So far consumers are showing little inclination to cut their mobile phone use and businesses are increasingly relevant on the technology, ensuring a base revenue stream.

Nevertheless the industry is still carrying a lot of debt, a figure PWC estimates will rise to €180bn in Europe alone. Refinancing is going to be difficult unless banks restart capital flows and PWC expects a few companies to go to the wall.

However, stock market data for 2008 shows that telecommunications providers did relatively well.

Mobile providers saw stock falls averaging falls of just 8.3 per cent, the best result of any PWC industry sector. Fixed line telecommunications faired slightly worse at 11.1 per cent but was still only the third smallest faller.

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