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Fall of the roaming empire: telecom groups face revenue loss as travel collapses

Leo Kearse’s smartphone has been his lifeline in recent weeks after the cancellation of the Melbourne International Comedy Festival left the British stand-up comedian stranded mid-tour in Perth, Australia.

But he encountered a major setback when Three, his mobile network provider in the UK, cut off his roaming data after he surpassed the limit and was unable to reach anyone on the company’s helpline to fix the problem.

“It is clearly the time I need this data roaming the most as I’m frantically trying to book new flights, reschedule shows, arrange accommodation as well as stay in touch with my family as my father is receiving cancer treatment and is vulnerable to the coronavirus,” a furious Mr Kearse said.

“Nobody’s in the call centre. The automated message sounds like it was recorded by the janitor on his first take.”  Telecom groups have been overloaded in recent weeks by a high volume of customers calling to say they are experiencing problems with their broadband and mobile connections as millions are forced to work from home during the pandemic.

But when it comes to data roaming — the extra charges incurred when a mobile phone user connects to a different network when abroad — they are facing a bigger problem than jammed lines.

The collapse of international travel as a result of coronavirus could cost the global industry $25bn in lost revenue this year — about half of what the sector makes annually from roaming charges — according to analysts at Juniper Research. Of this, about $12bn will be lost during the summer months as people are unable to go on holiday, revenue which is unlikely to be recovered. So far, telecoms have proven a resilient sector in the crisis, with subscriptions protecting the bulk of their revenue and the services they provide deemed essential by governments.  But analysts say the pandemic will signal the end of the roaming era.

Sam Evans, a senior partner with consultant Delta Partners, said the industry was still clinging on to roaming and high international calling charges. “It is a legacy business model and it is revenue that the industry should have moved away from,” he said. “Whether they like it or not, roaming will now die.” Roaming is only a small portion of overall industry revenue, which is forecast to be $820bn this year according to Juniper. Moody’s, the rating agency, said roaming accounted for about 1 per cent of overall revenue for European telcos.

Despite the European Commission outlawing roaming charges across the continent in 2017, charges still apply for travellers to other parts of the world. Many operators offer customers roaming packages if they travel abroad. The loss of revenue will also be unevenly felt between groups, with those in southern Europe likely to be worst hit. Networks have to pay each other to connect to users when abroad, favouring operators in Mediterranean countries due to the annual influx of tourists. Conversely, companies in Germany and Scandinavia tend to be “net payers” as their citizens travel abroad in the summer months, meaning the coronavirus lockdown could reduce costs for some networks.

“Greece, Portugal and Spain are very exposed to tourism and therefore operators in these countries will suffer the most,” said Maurice Patrick, an analyst at Barclays. “A number of operators have indicated that roaming represents between 1 percent and 4 percent of mobile service revenues with [Greek operator] OTE being the most exposed.” OTE declined to comment.

Barclays argues that the European telecoms sector is not immune to the effects of coronavirus. The bank cut its profit forecasts across the sector by between 2 and 4 percent as the disease spread with the collapse in roaming revenue one of the “direct” short-term factors, along with lower spending on pre-pay top ups.  Telecoms companies in other tourist hotspots such as the Caribbean are also more vulnerable as they rely on roaming charges from visitors for a large portion of their revenue.

One chief executive of a small island telecoms company said the effect could be “catastrophic” for some operators with roaming having already halved in recent weeks. “It is going to fall off a cliff,” he said. The effect will be exacerbated by population drains as immigrant workers — such as eastern Europeans labourers in the Channel Islands or accountants in the Cayman Islands — rush to get back home.

Mr Evans argues that telecoms companies should abandon roaming to focus on the positive impact of ensuring people stay connected. “What will undo it all is stories about ‘bill shock’ returning at this time of crisis,” he said.  The lesson has already been heeded by Vodafone which reversed a decision to charge customers visiting Turkey £6 a day to use their phones from May. A spokesman for the group said it had now contacted subscribers stranded in Turkey, after flights were cancelled, to tell them they would be given free unlimited data following a backlash.  Mobile phone companies will play a critical role in identifying people who need to be repatriated to the UK, but one network with 25,000 customers overseas said it was difficult to tell who was stranded and which users had permanently moved abroad.

A Three spokesperson said: “We understand that some of our customers are stuck overseas and are worried about keeping in touch with their friends and family, and we are looking at ways to help customers on a case-by-case basis.”

―Financial Times

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