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Bernstein sees a new super-cycle emerging in European telecommunications as copper networks approach their end of life while fiber deployments accelerate across the continent. The research firm notes that after more than a century of service, European copper telephony networks will soon be gradually switched off, overlapping with the beginning of the fiber era.
The regulatory landscape is currently focused more on incentivizing investment than imposing strict regulations, according to Bernstein’s analysis. The firm draws on interactions with leading regulatory bodies including Arcep, Anacom, Ofcom, and antitrust authorities like ComCo to anticipate how fiber will reshape the industry’s competitive dynamics in coming years.
Three distinct market clusters are forming across Europe based on infrastructure development patterns. These include areas with high deployment costs limiting competition (Germany, Switzerland, Netherlands), regions with increasing infrastructure competition leading to line loss and price competition (Spain, UK, France, Norway, Denmark), and markets where pure wholesale players own most fiber infrastructure (Italy, Sweden).
Network topology will significantly influence the regulatory framework, with physical unbundling of fiber networks largely impossible for many years. Bernstein notes that alternative wholesale solutions, even when priced close to cost, are more expensive and disrupt unbundlers’ pricing power, potentially allowing high returns to persist longer than expected in certain markets.
The firm identifies Deutsche Telekom (OTC:DTEGY) (ETR:DTE) and KPN ( AMS (VIE:AMS2):KPN) as likely beneficiaries of the fiber super-cycle. BT (LON:BT.A), Orange (EPA:ORAN) and Telefonica (BME:TEF) may face near-term challenges from infrastructure competition but could see reduced pricing pressure long-term, while Bernstein expresses caution on Telecom Italia (BIT:TLIT) (BIT:TIT), Telia (STO:ST:TELIA) and Telenor (OSE:TEL) for "trading lower capex today for worse positioning tomorrow."
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