Telecoms in good shape to survive the recession

The telecoms industry has much less debt than many other sectors

The telecoms industry is in good shape to survive the current economic slowdown, thanks to lessons learned at the turn of the century, according to a new report from PricewaterhouseCoopers (PwC).

The analysis found that the industry has kept levels of debt much lower than in other sectors, despite a flurry of mergers and acquisitions over the past 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," said Gary Taylor, a director at PwC.

"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 tougher, thanks to tighter balance sheets."

The position is further strengthened by the behaviour of consumers, who are showing little inclination to cut mobile phone use, and continued business use which is ensuring a base revenue stream.

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

However, stock market data for 2008 shows that telecoms providers did relatively well. Mobile providers saw stock falls averaging just 8.3 per cent, the best of any PWC industry sector. Fixed line providers faired slightly worse at 11.1 per cent.