Deloitte’s Technology, Telecommunications & Media (TMT) group, has today released its Global Telco Index, revealing that the combined market value of the Index increased 28% from 1 January 2003 to 31 December 2004. This is a marked increase from previous Indices, which outlined a 69% decrease from 1 January 2000. The EMEA weighting rose in the Index from 41% to 47%, outperforming smaller improvements in the Americas and Asia Pacific regions.

Tony Cooper, telecommunications partner at Deloitte, comments: “The industry appears to have adhered to a number of principles highlighted in Deloitte’s last Global Telco Index, in particular focussing on debt and operating cost reductions, as well as strategic acquisitions and alliances. In addition, companies are being cautious when rolling out technologies such as 3G where business models are yet to be proven.

“European telecom companies have focused on cost reductions over the past few years, which have resulted in higher earnings and market valuations. In addition, there have been new entrants to the European Index from Eastern Europe and the Middle East. Since these countries have low wireline and wireless penetrations, their enormous growth potential has helped drive the increase in the European combined market value.” The new entrants include four IPO listings in the last two years (including Saudi Telecom and Eircom Group), as well as re-listings of several telcos.

“In Asia Pacific, similar operating cost reductions, along with continued growth in China, have generated increased earnings in this region. These positive factors, however, have been partially offset by lower multiples, reflecting lower growth prospects from some of the relatively mature markets in the region, such as Japan and Korea.

“The American market is currently the subject of fierce competition between cable operators and traditional telco operators.  The tipping point has been the growing loss of wireline to wireless and, more recently, improvements in voice over internet protocol (VoIP) technology, which is enabling cable operators to offer triple play bundles of voice, data and television.  Consumers are starting to transfer to wireless companies for voice services and hence cable companies’ ability to offer the complete package - bundled voice, video and data - known as triple play.” 

The Index also demonstrates a reduction in the dominance of the top five industry players in each region and predicts that areas such as China and Eastern Europe will continue to grow and influence their regions.

The Deloitte Global Telco Index analyses telecommunications companies worldwide with a market capitalisation in excess of US$1 billion. The Index examines the sector in a national, regional, economic, competitive, regulatory and technological context since January 2003, and provides guidance on the industry’s short term future.  In the report, Deloitte predicts that:

• China will continue to grow and influence the Asia Pacific region, which will be driven by significant increases in mobile subscriptions and the incumbent operators looking for opportunities outside its own borders.
• The developing Eastern European market will continue to be the main driver of growth in the European region.
• India’s potential for growth is equivalent to China’s and is a wildcard in the Asia Pacific region.
• The American market will see dramatic change as the traditional telcos lose their wireline customers to the cable operators, who are now offering bundled voice, video and data packages.
• Telco companies will strive to be truly global, responding to the increased demand for seamless communication across borders and regions.

For a full copy of the report or for more information, please contact Jo Ouvry: jouvry@deloitte.co.uk / 020 7303 0587.

Ends

Notes to editors

About Deloitte’s Technology, Media & Telecommunications (TMT) Group
The TMT Group is composed of service professionals who have a wealth of experience serving technology, media and telecommunications companies throughout the world in areas including cable, communications providers, computers and peripherals, entertainment, media and publishing, networking, semiconductors, software, wireless, and related industries. These specialists understand the challenges that these companies face throughout all stages of their business growth cycle and are committed to helping them succeed. Deloitte is a leader in providing strategic, financial and operational assistance to its technology, media and telecommunications clients.

About Deloitte
In this press release references to Deloitte are references to Deloitte & Touche LLP.

Deloitte & Touche LLP is the UK's fastest growing major professional services firm based in 21 UK locations, with over 10,000 staff nationwide and fee income of £1,246 million in 2003/2004. It is a member firm of Deloitte Touche Tohmatsu, a leading professional services organisation, delivering world class audit, tax, consulting and corporate finance services, with around 120,000 people in over 140 countries. Deloitte Touche Tohmatsu is a Swiss Verein, and each of its national practices is a separate and independent legal entity.

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The information contained in this press release is correct at the time of going to press.