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Tuesday, July 11, 2006

Belgacom CFO Sees Sense

Continuing on the theme of new Telco KPIs:

"What will change over time is the focus on margins—I am not so hung up on margins as I am on absolute Ebitda"

Would you prefer a business making 50% margins on revenue of €1bn or a company making €550m on revenues of €1.2bn?

Personally, I’d prefer the latter as long as:
- not too much more capital was employed; and
- not too much more additional risk was introduced.

Any Telco who is too focussed upon margins will miss many opportunities at expanding into related lower margin businesses. Telco analysts need to wise up as well. It is not necessarily a bad thing if margins drop as telco’s move to control more of the value chain.

However, if margins drop because of lower prices, either via regulation or via competitive pressure, and the infamous price elasticity curve means that demand does not pick up enough to cover the fall in prices and then overall revenues fall then it is a bad thing. The “bad thing” affects all players in the market.

The Belgacom CFO, Ray Stewart, was discussing its’ move into the TV content business.