LACK OF RESEARCH THREATENS SHARE VALUE OF TELECOM OPERATORS

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LACK OF RESEARCH THREATENS SHARE VALUE OF TELECOM OPERATORS
02 May 2001 - European Institute for Research and Strategic Studies in Telecommunications GmbH (EURESCOM)

Heidelberg. The future prospects of telecommunication companies highly depend on their innovative power and the introduction of profitable new services. But the relative importance of R&D in the telecom sector has gone down, according to Dr. Claudio Carrelli, the director of the European telecom research institute EURESCOM.

'All major telecom companies have practically frozen their R&D budgets over the last years, although profits and the demand for new services have risen. This is becoming a boomerang,' said Dr. Carrelli on Wednesday at the presentation of EURESCOM's Annual Report in Heidelberg.

An obvious example for this boomerang effect was, according to Dr. Carrelli, the reaction of the financial markets to the UMTS licensing in several countries. Questions about the added value of UMTS and its new services could not be sufficiently answered. 'The difficulties in building a UMTS network and in developing marketable UMTS services are a direct consequence of a deficit in R&D efforts.' Moreover, the EURESCOM director is convinced that the general lack of innovative achievements contributed to the downward trend in share value. 'R&D investments are an investment in the future. If you don't invest enough in the future, business prospects might become quite uncertain. Thus the trust of analysts and share owners is in danger.' Dr. Carrelli sees in this a conflict between short-term profitability and innovation: 'Cutting R&D expenses improves profitability for the moment, but reduces it in the future.'

EURESCOM itself could offer a possible escape from the cost-saving pressure with its 10 years of experience in collaborative research. But even at EURESCOM, due to limited financial resources, several proposals, e.g. for UMTS-related projects, had to be turned down last year. Dr. Carrelli is sure that EURESCOM will soon take advantage of the general trend in R&D: 'Tight R&D budgets make collaborative research more attractive for telecom operators.' However, EURESCOM's director hopes that R&D in the companies themselves will be strengthened in the near future. 'We need more innovations than ever,' Dr. Carrelli is convinced.

International telecom experts will discuss the influence of innovation on share value at a conference in Heidelberg on 16 and 17 May, which will be held on occasion of EURESCOM's 10th anniversary.

http://www.eurescom.de

About: European Institute for Research and Strategic Studies in Telecommunications GmbH (EURESCOM)
Eurescom is the leading European organisation for collaborative R&D in telecommunications. It provides management of research projects and programmes for member companies and other clients. Companies who wish to collaborate on the key issues facing the telecoms industry are welcome to join the Eurescom community.

The EU Framework Programme has two main strategic objectives: strengthening the scientific and technological bases of industry and encouraging its international competitiveness while promoting research activities in support of other EU policies. EU FP6 website: http://fp6.cordis.lu/fp6/home.cfm

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