Barclays-European Telecom Services Copper Switch-off：Unlocking the Fibre Dividend-20251020

As we near the end of fibre rollouts, Telco capex is falling. And copper switch-off is emerging as a significant lever for greater cost savings. Cost headwinds become tailwinds, providing visibility for improving sector FCF/ROCE. We see TEF/Telia/TNOR most positively exposed to theme.

The EU Telecom sector is now showing sustainable EBITDA/FCF growth, as costs keep falling (opex and capex) as Fibre rollouts slow. This should continue in our view.Crucially, copper switch-off is emerging as a key mid-term focus for future cost efficiencies and margin expansion for incumbents. Although data points remain limited, our analysis suggests that retiring legacy copper networks could yield savings equivalent to 2–3% of domestic revenue or 3–5% of domestic operating costs—driven by fibre’s superior energy efficiency and lower maintenance needs. As fibre rollout nears completion in many regions, operators are also guiding for lower capex intensity, reinforcing near-term OpFCF margin expansion. We estimate average normalized capex (ex-fibre) intensity for European incumbents over 2025-30 around 13% and OpFCF margin of around 26% compared to reported 17%/22% respectively at present. We see Telefonica Spain, Telenor Norway, and Telia Sweden as clear beneficiaries by 2026/2027, with copper switch-off and fibre deployment largely behind them. We do see scope for positive near-term opex/EBITDA surprises. KPN/BT/ORA/PROX/SCOM have the full copper-switch-off benefit/tailwind ahead of them, but realistically very little is likely to be realised in the next couple of years. For DTE we only expect an impact after 2030. We note KPN/Telenor/TEF will be hosting a CMD in November this year, and we expect falling capex plus copper switch-off savings to be a major theme.