risks growing to telecom operators' shielding models, Citi says

FRANKFURT stuck between regulators and aggressive threats via internet gamers, telecom operators globally face harsh picks that might disenchanted their desired popularity with investors as defensive, dividend-rich shares, Citi said on Wednesday.

Citi research analysts say in a 146-web page report that cell and stuck line operators must choose among making an investment to emerge as digital players to fend off internet foes or streamlining their agencies and acting as "dumb pipes" for virtual gamers.

the worldwide, comparative survey reveals dozens of promising examples of telecom community operators trying out the waters to turn out to be virtual players of their very own proper, but no successful examples of complete digital makeovers.

a major factor in telecoms' resistance to exchange is that most traders prize them for his or her balance and constant dividends, while assigning little fee and usually huge risks to the deal-making and restructuring wanted for digital makeovers.

"A majority of investors are still skeptical that such transformation with a fundamental enterprise impact could even occur," Citi analysts write. "That said, a developing range of traders are already beginning to see digitally-driven structural modifications as a possibility".

amongst many troubles raised, operators may be required to make investments on an "remarkable scale" in subsequent-technology 5G wi-fi networks due around 2020, the authors warn.

The benefits of embracing new digital strategies beyond imparting primary community get entry to is that these generally tend to include lower burdens from neighborhood or national regulators.

Concrete actions on this route include Verizon's (VZ.N) push to buy internet residences like Yahoo (YHOO.O), NTT DoCoMo (9437.T) and SingTel (STEL.SI) investments in media, advertising and large facts, Safaricom's (SCOM.NR) pass into economic services and BT (BT.L) possession of soccer broadcast rights.

still, Citi notes, the idea of telecoms increasing into adjacent industries is not anything new: "A similar idea about telecoms increasing into net, advertising, e-commerce etc. changed into in truth one of the drivers which fueled the 1990s stock marketplace bubble inside the sector."