Orange Ceo Says ‘no Money’ In Europe As Carriers Fight Eu Rules

“Europe has been a very conservative market compared with the U.S.,” said Sharat Kumar, head of delivery for Europe at No. 5 Indian player Tech Mahindra, whose European clients include food giant Nestle SA and aerospace firm EADS . “The customers are conservative in starting the initiative, but once they do, these are the customers that don’t just go back and forth or drop it, so what we’ve seen is that there is a lot more stability in the European customer,” he said. For European companies, many of them battered by a prolonged economic slowdown, Indian IT firms offer cost advantages to using local vendors or doing the work in-house. Global rivals such as IBM and Capgemini also have big operations in India that can take advantage of lower costs. Indian vendors are also taking on increasingly complex work. “To a certain extent, the skills shortage in continental Europe is driving the growth for offshore openness,” said Katharina Grimme, a principal consultant with outsourcing advisory Pierre Audoin Consultants (PAC) in Cologne, Germany. LOCAL CHALLENGES Indian IT’s progress in Europe comes at the expense of local vendors, which according to NelsonHall are seeing flat sales. In 2009, India’s TCS ranked just 21st in IT services revenue from Europe, the Middle East and Africa, but rose to 11th at the end of 2012, according to PAC. Indian rivals Wipro and Infosys ranked 18 and 23, respectively, in 2012, after not cracking the top 25 in 2009. To address labour issues and speed growth in Europe, Indian companies have been acquiring local firms. To win client trust, they hire locally for senior client-facing roles, but most of the grunt work can be done from India. Jef Loos, head of sourcing research at Whitelane Research in Brussels, said Indian vendors moving into Germany, France, Spain and Italy will use acquisitions given language barriers, a “limited” outsourcing culture, and stronger unions.

There is very little in the proposals that concretely allow us to drive further consolidation, Philipp Humm , Vodafone Group Plcs head of Europe, said at the conference. Even so, the industrys frustration with regulators may be driving an increase in share valuations as mergers and acquisitions pick up for the industry across Europe, said Robin Bienenstock , an analyst with Sanford C. Bernstein. In Spite The regulation event has proven to be so inordinately time-wasting and frustrating and dead-end that youre starting to see companies act, Bienenstock said at the event. The regulations are so lousy that people are starting to act in spite of it. Oranges Richard said that while he previously wouldnt pursue deals because he was convinced regulators would reject them, hes decided the best strategy is to test the market with deals to find out what regulators will tolerate. We cannot compete in our environment anymore, said Timotheus Hoettges, deputy CEO of Deutsche Telekom. Europe is at a scale too small to be relevant. Hoettges said that the major European carriers would all have to combine to have a market capitalization comparable to AT&T Inc., the biggest U.S. phone company. Dallas-based AT&T has a market value of about $175 billion. Weve Listened With antitrust scrutiny making consolidation tough, carriers are expanding services as a way to grow, with mobile operators adding television and fixed services to increase monthly bills and customer loyalty. Vodafone agreed to buy German cable company Kabel Deutschland Holding AG this year to add more services in its biggest market. Telefonica SA is testing competition regulators tolerance, attempting to take over Royal KPN NVs German unit to merger their local companies. The deal, which would cut the number of German carriers to three from four, is seen by Richard and others in the industry as a bellwether for consolidation. Kroes doesnt see her proposals as standing in the way of consolidation, she said — they may even help encourage it ultimately.