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European communications groups are lined up transactions in hopes that the EU’s new competition chief Teresa Ribera will loosen its merger rules.
Norwegian Telenor told the Financial Times that Spanish operator Telefonica, which owns the investment of European operators, was exploring acquisitions while saying at a recent meeting that it was open to options in markets such as Spain, Germany and the UK.
Lawyers and industry insiders are in the feasibility assessment stage for several other transactions.
Brussels has been wary of industry mergers in the past. This cites the risk that consumer prices will rise and services will be low.
The industry claims that the resulting lack of scale and market fragmentation (Europe has 41 mobile operators with over 500,000 customers, and if small businesses include it is hampering their ability to invest in technology and infrastructure.
Orange CEO Christel Haydemann recently said, “Our telecom business is a business of scale. If you want to invest, you need scale.”
The telecom company hopes that Mario Draghi’s report on European competitiveness, released last September, will lead to change.
It made recommendations to promote growth and help the bloc catch up with the US and China. One of them was that they should be more open to telecom mergers.
EU Competition Chief Teresalivera said he would like to further explain the innovation, environmental and social goals in the merger decision © Stefan Wermuth/Bloomberg
The Draghi Report recommendations are in line with long-standing calls from France and Germany, creating European champions in strategic sectors such as aviation and communications.
“That story was impossible to push under Vestager,” one lawyer involved in the telecom merger mentioned Margrethe Vestager, former EU competitive director. “It’s now more open to discuss integration.”
Alessandro Gropelli, director of the industrial group Connect Europe, said the “political awareness” of the need for integration was “higher than ever.”
He cited a study published by the group in January. This found that per capita telecom investment in Europe was 117.9 euros in 2023 compared to the US equivalent of 226.4 euros.
One veteran communications M&A lawyer commented, “When the committee lights up the green, it lights up one large transaction and you see a wave of consolidation.”
Still, the committee has yet to show whether or how it will change the competitive landscape of the industry.
Rivera told the Financial Times earlier this year that she hopes to explain more innovation, environmental and social goals in the merger decision, but has not released more details.
Meanwhile, Olivier Gacent, a senior civil servant who oversees the block’s competitive policy, warns against a fundamental overhaul. Consumer organizations are also opposed to changing approaches.
“There are fewer regulations that concentrate more on the market, and more mergers don’t benefit consumers. That risks making them worse,” said Agustin Reina of Umbrella Group, the European consumer organization.
Carls Esteva Mosso, a partner at the law firm Latham & Watkins and former senior competition official, said the committee is wise to consider a communications M&A on a case-by-case basis. “Some of these mergers could undoubtedly lead to more investments.
Sir Jonathan Foul, another former senior official currently in PR company Brunswick, said the EU is facing a chicken and egg dilemma.
“Some people say that telecom mergers in Europe make sense if they have a genuine single market with one spectrum and general rules.
Others will argue that they make sense because those conditions speed up the day they win. Signals from Brussels are not only welcome to plan investments and trades, but also to nervous consumers. ”
