Time is running out for Europe's telecom companies. Investors don't believe they can meet debt-reduction targets, nor do research analysts or the rating agencies, which are threatening further downgrades. Even the companies' own management teams are starting to have doubts about the tenability of widely publicized restructuring plans, admitting that perhaps they've been a little optimistic.
During the past year, telecom companies have slid a long, long way into the red. Between them, the main incumbents - the former state-owned companies - have run up a bill of e150 billion ($137 billion) bidding for universal mobile telecommunications system (UMTS) licences. They've also been having "fun and games on the side", in the words of one analyst, acquiring competitors and buying stakes in others.
But now the fun has stopped as the telecom companies have started to realize exactly what they've got themselves into. Before they see a single euro of return on their UMTS licence outlay, they have to spend roughly the same again in rolling out the infrastructure necessary to support third-generation (3G) mobile communications. "Capex needs are extremely high in the coming years," says Bradley Bugg, telecom credit analyst at Dresdner Kleinwort Wasserstein, who estimates that another e150 billion of spending on UMTS will be necessary before the network becomes operational.