The telecoms market is set to grow by 4 per cent this year, according to market researcher IDC.
The company said that telecoms network services in Western Europe were set for a boost after a "stabilising year" in 2003.
"This level of growth is significant when one considers the uncertainty that has blighted the sector over the last few years," said Eric Owen, vice president of IDC's European Telecommunications service.
The company didn't provide much public detail of its findings but said that in the voice market, fixed-line operators were keen to stem the loss of revenue to wireless networks and planned bundled products to keep fixed-line voice customers.
Analysts at the Yankee Group, another market research firm specialising in telecoms, pointed out that business DSL was a massively growing market; Frame and ATM services were still growing a little; and wide-area Ethernet was starting to take off. However, leased circuits on the retail side were dropping.
On the consumer side, Yankee said there was obviously huge growth in fixed-line consumer broadband but fixed voice revenues were continuing to decline. Fixed-line voice for business was in a similar boat.
"The question is: Do broadband revenues make up for that?" asked Camille Mendler of Yankee's business telecoms group. Consumer broadband is estimated to grow 20 per cent a year between 2002 and 2007. "If you throw in wireless growth, it is looking more attractive," Ms Mendler added.
She said that for some fixed line operators, the choices were difficult: "Do we offer voice bundled with broadband, cannibalising our old voice revenue?
"But the new infrastructure will save them money - if they converged their infrastructure more, streamlined their networks, the costs would be lower." She said that bundled products were attractive to customers if they saved them money or were simpler to deal with.
On the business side of the market, bundles could include teleworker solutions - including a firewall, anti-virus services, short-code dialling into the corporate network as well as broadband access. On the consumer side, Yankee said, BT already offered a bundled mobile service with T-Mobile through which customers could use their mobile phone at home and pay ordinary fixed-line rates.
On the Continent, France Telecom and Belgacom in Belgium have gone the whole hog, Yankee analyst Jonathan Doran, said - offering telecoms, Internet and television in one package. "France Telecom started offering a television service in December. Their focus is in boosting their strength as a broadband provider. Most telcos are looking to broadband as a future cash cow as the price of voice gradually erodes.
"Deutsche Telekom is offering video services to ADSL customers to make their broadband access package more attractive. For some it's just video-on-demand or downloading music videos, but some like France Telecom are offering multi-channel TV services." The incumbents in the top five Western European markets have launched significant services. "If people are more hooked on the content as well as broadband access they have to stick with their telephone line."
BT had been looking at it - and is no longer restrained from offering entertainment services - but was not keen to take on the cable and satellite companies head-to-head.
IDC's report also pointed to growth in voice-over-IPand that service providers were evolving their portfolios accordingly. The mobile market also looks good after the last few years' financial difficulties. "Collectively, the industry has made significant steps forward and put in place the building blocks for a multimedia future," the report concluded.