Economist Intelligence Unit report paints grim picture for telecoms industry if UK votes for Brexit, citing revenue, roaming and investment concerns
Telecom operators and customers would be impacted negatively if the UK votes to leave the European Union (EU) on the 23 June, according to research from the Economist Intelligence Unit (EIU)
Its report claims a ‘Brexit’ would make the UK a less attractive place to invest and a predicted recession in 2017 would reduce investment in networks and revenues compared to the scenario imagined if the country remains in the EU.
This would result in a poorer service for businesses and consumers who would also be impacted by a potential exclusion from the European digital single market (DSM) and might not benefit from plans to abolish roaming within the EU from 2017.
Falling revenues
“Ostensibly, the UK telecoms market may not be as affected by a Brexit scenario as other industries, primarily because consumers engage with operators at a national level, while there is little in the way of trade in telecoms products that would have a substantial impact on levels of imports and exports,” notes the EIU, however it addresses a number of concerns.
As a member of the EU, telecoms investment would rise by 29 percent between 2015 and 2020 compared to 23 percent in the event of a Brexit, while revenues would rise by 21 percent over the same period if ‘remain’ wins, while they would increase by just 12 percent if the ‘leave’ campaign is victorious.
Both figures would be compounded by higher unemployment and a six percent fall in GDP if the UK leaves the EU. Indeed, the report says the economy would not grow until 2020 and a politically disruptive period would also harm the industry as customers would have less money to spend on services.
Network economics
At an industry level, a Brexit would in theory allow the UK government to take a lead in telecoms research as it would no longer have to seek approval from the EU to grant state aid. However the report says this is unlikely, as is the likelihood that further market consolidation could take place.
Three’s proposed merger with O2 was blocked on competition grounds by the EU, but both Ofcom and the Competition and Markets Authority (CMA) had both expressed concerns about the reduction of four mobile operators to three.
Participation in the DSM would be dependent on the UK’s ability to negotiate a trade agreement with the EU, as would roaming.
Roaming concerns
Ofcom could impose regulatory restrictions to ensure UK consumers benefit, while competitive pressures may force operators to eliminate charges, however the EIU says there is a risk the UK could look isolated if it does not fall in line with the rest of Europe.
“It is unclear whether Ofcom would choose to try and replicate the aims of the abolition of roaming charges in the rest of Europe,” said the report. “Should it wish to do so, its task would involve co-ordinating a significant number of commercial agreements to effectively abolish the charges.”
European Economic Area (EEA) countries like Norway benefit from the DSM, Switzerland is not included, setting a potential precedent for the UK. However such a settlement could be included in any agreement to leave the EU, as has been suggested by Digital Economy Minister Ed Vaizey.
Tech support for the EU
BT, the UK’s largest super-fast broadband provider, also owns the UK’s largest mobile network following the £12.5 billion acquisition of EE. It has urged its staff to vote to stay within the EU.
UK technology firms appear to be overwhelmingly in favor of staying in the European Union when voters head to the polls on 23 January.
Research from industry body tech UK suggests 70 percent of its members want to stay in the EU, 15 percent want to leave and 15 percent don’t know. The majority support the UK’s membership because it makes the country more attractive to international investment, makes the UK more globally competitive and gives it a more favorable trading relationship with other members.
“There is a strong message from the tech industry that Europe is good for business. Tech leaders are clear that the UK needs to be holding the pen on the laws that affect their businesses,” said Julian David, tech UK CEO.
“A vote to remain is a vote to ensure the UK voice is at the heart of policies that support the UK’s most innovative sector to continue to grow and create jobs. A vote leave would mean that the UK tech industry would lose its voice on the issues that matter most.”
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