Telecom Top 100 - Special Report: CWI's Carrier Survey - Statistical Data Included

CommunicationsWeek International, March 4, 2002 by Emma Whitten

Revenue rankings for the Top 100 telecoms operators in the last financial year may not have changed much, but this anchor belies massive shifts in profitability and liquidity as carriers extricate themselves from the industry slump. Emma Whitten of CIT Research reports

If the year 2000 brought telecoms network operators the harshest operating environment yet seen, there was no let-up for them in 2001. With access to capital severely limited, the industry is furiously re-inventing itself, with cost-cutting and consolidation the watchwords.

When we ranked the world's 100 biggest telecoms network operators by revenue last year-- based on final results for financial year 2000-01--we found the top places dominated by incumbent telcos like NTT of Tokyo and Verizon Communications in New York.

It was no surprise, then, that few new competitive operators-- whether competitive local exchange carriers or new entrant regional network operators-were even in the the top half of the charts. After all, just to get in at number 100 in the world ranking, Level 3 Communications needed revenues close to $1 billion. The combined revenues of the 100 operators together totalled nearly $1,000 billion.

Biggest movers in revenue

Little has changed in the revenue rankings of the Top 100 operators in the first half of financial year 2001-02, as defensive actions by all but a few took precedence over aggressive expansion and acquisition.

Singapore-based SingTel's acquisition of Australian operator Optus, completed in October 2001, has pushed it ahead of Sweden's Telia in the revenue rankings, though for ease of comparison, we have shown the two operators separately.

As expected, huge growth in China's mobile services market last year propelled China Mobile, of Beijing, up the revenue league table, from position 28 to 21. CIT expects that a full-year 2001-02 analysis would see it move inside the top 20.

The first six months of 2001 were also good for AT&T Wireless, of Redmond, Washington. It travelled up from 25 to 19 in the telecoms revenue rankings, increasing its second quarter revenue by 39.4% to $3.12 billion, on the back of strong subscriber growth and network acquisitions in San Francisco and Los Angeles.

Biggest movers in profitability

After a horrendous financial 2000-01, in which it made losses of $2.48 billion, British Telecom, of London, managed to pull itself from the bottom of the heap (rank 96) to the very top, recording 2001-02 first half net profits of $4,157 million. The cost of the recovery? Several large businesses were sold, notably its shares in Japanese operator J-Phone and its directory services, Yell. While business disposals between April and September 2001 raised [pounds sterling]7.3 billion ($10.3 billion) fur BT, the effect is that it has sacrificed five places in the revenue league table, moving from fifth position to tenth. Furthermore, the operator made losses of $2.1 billion in the second quarter of 2001-02.

The demerger of its mobile arm, mmO2, has helped BT service its remaining debt and the maneuver looks sure to be repeated by other hard-pressed telcos in the year ahead.

The US giants falling

Having been the most profitable group in full year 2000-01, Verizon Communications fell to 19th position in the first half of 2001-02. Since then, it has slipped further: in the fourth quarter of 2001 it reported a net loss of $2.03 billion.

Verizon Wireless, Verizon's mobile network operating subsidiary, which is a joint venture between the operator and Vodafone in the U.K., is currently involved in an action against the national regulator in Washington, D.C., the Federal Communications Commission (FCC), in which it has asked the courts to direct the regulator to comply with a court order made in June 2001 to return more than $1.7 billion of third-generation license down payments to the operator.

Verizon Wireless says it is losing more than $250,000 a day because the FCC is not paying interest on the deposit, made when the mobile operator paid $8.7 billion for radio frequencies. Questions over the legality of the auction in the first place mean Verizon has never received the spectrum, let alone used any of it.

Verizon's pain will be little consolation to European operators who spent [euro]157 billion, most of it at auctions, for third generation mobile licenses. Some of them have been forced into drastic rescheduling of their investment plans and debt, with mmO2 this month withholding [pounds sterling]700 million of its [pounds sterling]3.3-billion infrastructure fund for the time being.

Recently, there has been better news in the wireless industry. The governments of France and Spain are offering kinder licensing terms for operators, extending the commercial period of licenses and even reducing the prices. It's too early to tell what difference that will make to the business case for 3G networks yet to be built. Enthusiasm for basic infrastructure sharing has been dampened somewhat by doubts about the extent of cost savings.

For the time being, getting the finances on a more even keel is still the biggest concern for all types of operators-fixed or mobile.