Originally published: Mediacells, London, June 2 2009

There is some fantastical gossip circulating in the industry, currently.

Economic slowdown, depreciation, amortization and impairment losses are the watchwords in Q1 2009 financial reports for most of the telecoms operators, with brothers Doom and Gloom never far from any fiscal document.

As a result, Telefónica O2 UK’s total ARPU in the first quarter of 2009 showed a 3.6% year-on-year decline in local currency.

For Vodafone Europe, organic service revenue declined by 1.7% and in the words of CEO Vittorio Colao this is “reflecting the economy and a strongly competitive environment”.

The juiciest industry gossip continues to centre around the future fortunes of T-Mobile UK, reportedly being valued at a meagre £3.3bn; a price tag Deutsche Telekom have allegedly ‘created speculation’ over, earlier this month, according to the Observer newspaper’s Business section, 31 May 2009. 

In the same newspaper, it is reported that a France Telecom Orange offer for the embattled UK operator (Q1 2008 on Q1 2009 total revenue losses of EUR 222 million) was rebuffed by German chiefs at DT HQ in Bonn.

The loss for DT as a group, in the first quarter of 2009 amounted to EUR 0.9 billion compared with a profit of EUR 1.1 billion for the first quarter of 2008. As Deutsche Telekom states in its Interim Group Report January 1 – March 31, 2009: 

"This was the result of an impairment loss recognized on the goodwill of the cash generating unit T-Mobile UK in the Mobile Communications Europe operating segment."  

The reasons for the ‘impairment loss’ primarily include the major economic slowdown and more intense competition in the United Kingdom. According to DT, lower roaming revenues and newly introduced regulation of roaming and termination charges had a negative impact on revenue. Increased termination charges for the use of third-party mobile communications networks and high levels of expenditure for customer acquisition and retention resulted in increases in the cost base.

Perhaps the most preposterous rumour mill is trodden manfully by the Guardian newspaper's Richard Wray, who asserts in Sunday's Observer:

“Vodafone is also rumoured to have proposed swapping its Turkish business for T-Mobile UK, which would give Deutsche Telekom a strong position in the eastern Mediterranean as it controls Greek operator OTE. This deal, however, has been denied by sources close to Vodafone.”

One should think so, too, given Vodafone Turkey’s weak position, as stated in the latest annual report for the years ended 31 March. In fact, despite Vodafone’s organic revenues growing by 3.9% in Africa and Central Europe, the EBITDA margins declined by around three percentage points, driven substantially by lower profitability in Turkey.

Vodafone Turkey and T-Mobile UK do have one thing in common, though: they have both appointed new management teams in 2009.