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European telecoms groups are lining up deals in the hope that the EU’s new competition chief Teresa Ribera will loosen the rules on mergers.
Norway’s Telenor told the Financial Times that it was exploring acquisitions, while Spanish operator Telefónica, which owns stakes in operators across Europe, said at a recent conference that it would be open to options in markets including Spain, Germany and the UK.
Several other deals are in the feasibility assessment phase, lawyers and industry insiders told the Financial Times.
Brussels has in the past been wary of mergers in the industry, citing the risk of higher prices and poorer service for consumers.
The industry argues that the resulting lack of scale and market fragmentation — Europe has 41 mobile operators with more than 500,000 customers and more if smaller companies are included — hinders their ability to invest in technology and infrastructure.
Orange chief executive Christel Heydemann recently said: “Our telecom business is a business of scale. If you want to invest, you need scale.”
Telecoms companies are hoping that Mario Draghi’s report on European competitiveness published last September will lead to change.
It made recommendations to encourage growth and help the bloc catch up with the US and China. One of those was that it should be more open to telecoms mergers.
The recommendations in the Draghi report align with long-standing calls from France and Germany to create European champions in strategic sectors, such as aviation and telecoms.
“That narrative was impossible to push under Vestager,” said one lawyer involved in telecom mergers, referring to former EU competition chief Margrethe Vestager. “There is more openness now to discuss consolidation.”
Alessandro Gropelli, director-general of industry body Connect Europe, said “political awareness” of the need for consolidation “had never been higher”.
He cited research published by the group in January that found that per capita telecoms investment in Europe was €117.9 in 2023, compared with the equivalent of €226.4 in the US.
One veteran telecoms M&A lawyer commented that: “Once the commission green lights one major deal, we’ll see a wave of consolidation.”
Still, the commission has not yet signalled if and how it will change the competition landscape for the industry.
Ribera told the Financial Times earlier this year she wanted to take more account of innovation, environmental and social goals in merger decisions, but has not publicly given more details.
Meanwhile, Olivier Guersent, the senior civil servant who oversees the bloc’s competition policy, has warned against a radical overhaul. Consumer organisations are also pushing back against a change of approach.
“Less regulation and more mergers that further concentrate the market will not do consumers any favours, it risks leaving them worse off,” said Agustín Reyna of umbrella group the European Consumer Organisation.
Carles Esteva Mosso, partner at law firm Latham & Watkins and a former senior competition official, said the commission would be smart to look at telecoms M&A on a case-by-case basis “Some of these mergers could definitely lead to more investment. This is what the commission has underestimated a bit so far in their analyses.”
Sir Jonathan Faull, another former senior official who is now at PR firm Brunswick, said the EU faced a chicken-and-egg dilemma.
“Some say European telecom mergers will make sense once there is a genuine single market with one spectrum and common rules.
“Others will argue that they make sense because they hasten the day when those conditions will prevail. A signal from Brussels would be welcome for those planning investment and deals, as well as nervous consumers.”
