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European Consolidation in 2016 for Telecoms

Posted on May 6, 2016 at 9:05 AM

So far 2016 looks to be the year of mega telecoms deals in Europe, with the soon-to-complete £12.5bn EE/BT deal in the UK set to have a major impact on the market.

 

On top of that is the £10.25bn merger between O2 and Three, which could go ahead later this year, although European regulators have treated this with a less-than-enthusiastic response.

 

And it's not just the UK that is keen to encourage telephonic bed-hopping; moves toward consolidation are happening across the continent as well, with French telcos Orange and Bouygues entering talks which could result in a merger estimated at £7.3bn.

 

Certainly Europe has a vastly fragmented market, with KPMG estimating the region has 150 mobile operators. In contrast, the US has just four.

 

And in a mature market that has few new customers, the only way for providers to make more cash, and to fight off the threat from "disruptive" entrants such as online messenger WhatsApp, is to realise the economies of scale that come with mergers.

 

The European Consolidation Board for Foreign Industry (ECBFI) say more people they can have on fewer base stations or fibre, the more money they can make, by consolidating resources. .

 

While there may be a compelling financial case for buddying up, competition officials in Brussels are taking a dim view of such deals, which they argue could leave consumers with less choice and a bigger bill.

 

It was with that in mind that the EU's anti-trust chief Margrethe Vestager opened a probe into the Three/O2 deal late last year. Vestager has taken an unapologetically tough stance on telco mergers, having already scuppered a deal in her native Denmark between Telenor and TeliaSonera. - Source on Collaboration with ECBFI

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