Gartner Says Only 50 Percent of European Fixed Line Telecom Operators Will Survive as Independent Businesses by 2006
Businesses to evaluate operators on short-term financial capabilities rather than long-term potential until 2003
Cannes, France, November 6,2001 - Gartner, Inc. (NYSE: IT and ITB) today warned that by 2006, only 50 percent of fixed line telecom operators in Europe will survive as independent entities, while only five worldwide will succeed as global operators. Analysts said that while market conditions will force consolidation, a number of operators will also decide to exit the market place because they consider it is no longer worth the money.

Taking stock of the turbulent telecom industry during its annual European Symposium ITxpo conference in Cannes this week, Gartner analysts said European operators have put too much focus on developing the technology necessary to deliver new services, at the expense of how to make money from the services. Analysts advised fixed telecom operators to consider spinning off their networks business to focus investments on developing next generation services such as managed data services and network outsourcing for enterprises, IP Centrex, billing presentment for business to consumer, and consumer portal and home management services.

While the telecom industry goes through a period of consolidation, Gartner advised its end-user clients that the success or failure of telecom operators also have the power to seriously impact their own business' success or failure. Said Eric Paulak, Research Director Gartner Europe, "In the past, if a company had financial problems, it would take six to 12 months before the issue was resolved and customers were impacted by it. In the last six months, we have seen examples of telecom operators going into receivership at close of business on a Friday, with customers being cut off from their services on a Saturday, needing to find a new provider before Monday morning. It can't be done." "We are advising clients to take a very focused approach to selecting the right suppliers to protect themselves from this."

Gartner said that through 2003, telecom operators should be evaluated on their short-term financial capabilities, rather than their long-term potential. To this end, Gartner revealed a financial and capability framework (see below) to help businesses assess the viability of operators and ultimately pick a winner. Paulak said "whilst this alone will not guarantee success, their absence will ensure failure."


Picking a Winner - The Four Cs

Cost:   Does the operator display innovative thinking in keeping costs down through improving efficiency or increasing economies of scale and scope, and do they have the ability to show profit in short time?
Cash Cow: Does the operator have an existing significant revenue stream to fund new sources of growth during the revenue slowdown, which itself is not under attack from a high degree of competition? If they don't, there is no time to get it in time.
Capital: The capital markets have clamped down on its investments.
If an operator does not have the first two Cs, they are not likely to attract investments. So, a telcecom operator needs to have access to good old fashioned cash.
Capability: A healthy balance sheet today will be short lived without a strong service offering. Most operators are focusing on technology whilst customers are interested in the services offered and the quality of it.



Gartner Symposium/ITxpo is the IT industry's largest and most strategic conference, providing business leaders with a look today at the future of IT. For more than 10,000 IT professionals from the world's leading enterprises, Gartner's annual Symposium/ITxpo events are key components of their annual planning efforts, and a place to gain insights into how their organizations can use technology to address business challenges and improve operational efficiency. For more information online, go to www.gartner.com/symposium.

About Gartner, Inc.
Gartner, Inc. is a research and advisory firm that helps more than 11,000 clients understand technology and drive business growth. Gartner's divisions consist of Gartner Research, Gartner Consulting, Gartner Measurement and Gartner Events. Founded in 1979, Gartner, Inc. is headquartered in Stamford, Connecticut and consists of 4,300 associates, including 1,200 research analysts and consultants, in more than 90 locations worldwide. The company achieved fiscal 2001 revenues of $952 million. For more information, visit www.gartner.com.

Contact:
Laurence Goasduf
Gartner
+ 44 1784 267-195
laurence.goasduf@gartner.com