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Telecom services revenues shrank by only 2% across Europe’s biggest economies in 2020 compared with a near 8% decline in gross domestic product, says Scope Ratings.

“Such resilience underpins our ‘A’ industry rating - a component in our assessment of business risk - for European telecom operators’ credit outlook,” says Jacques de Greling, analyst at Scope Ratings. “However, we expect revenue growth to continue to undershoot long-run GDP growth as economies recover from the pandemic,” says de Greling.

Latest data from Europe’s telecom regulators show how resilient telecom services revenues were last year despite the deep recession in Europe. Most of European telecom regulators have now published their annual reports for 2020.

Scope has focused on regulatory data from the four biggest EU economies - Germany, France, Italy, Spain - and the UK which together represent 63% of the broader region’s population. In these five countries, the coronavirus-linked economic contraction last year was an even more severe 8.2% on average compared with 1.1% growth in 2019. Spain’s economy was worst affected, contracting by 10.8%, whereas the recession was relatively modest in Germany, where output declined 4.9%.

In contrast, the decline in telecom services revenues was much more modest, though revenue growth before the crisis was running well below the expansion of the broader economy. Telecom services revenues, on average, declined by 2.0% last year, ranging from a decline of 6.9% in Italy to 0.3% growth in France. Revenues fell 1.3% on average in 2019 and were down by average of 0.7% on a five-year basis.

“The industry figures also support our view that exponential growth in data usage isn’t translating into extra income for operators, even in the case of the mobile segment as 5G networks expand,” says de Greling. For example, strong growth in mobile data usage in Finland, one of Europe’s most advanced telecoms markets, has proved a poor catalyst for increasing mobile revenues at the country’s telecom operators. Mobile data consumption grew 56% a year between 2010 and 2020, but mobile revenues grew just below 2% a year, with the number of mobile subscribers growing just 1% a year.

“Finland’s experience is telling for the rest of Europe, explaining why we believe that the introduction of 5G will have negligible impact on mobile revenues as indeed was the case for 3G and 4G,” says de Greling.

For more analysis of telecom operators BT PLC, CETIN AS, Deutsche Telekom AG, Elisa Oyj, Magyar Telekom Nyrt, Telefonica SA, KPN NV, NOS SGPS SA, Proximus SA, Swisscom AG, TDF SAS, Telekom Austria AG, Tele2 AB and Vodafone Group Plc, please consult the credit ratings exclusively available on investor platform ScopeOne.