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The Consolidation of European Telecommunications Companies: A New Trend?

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The words "mergers and acquisitions" are on the lips of executives at all the major companies in the European telecommunications sector. Since European regulators have relaxed their position on the assessment of the intensity of competition on the continent, talks have initiated and investments revived. Journalist Romain Gueugneau explains this phenomenon in Les Echos:

The industry is in turmoil. Not a few months go by without transactions or merger rumors making the headlines. After Ireland, Germany, France, and Portugal, observers have tnow heir eyes on the UK. Specifically, on British Telecom, which triggered hostilities last week by divulging its mobile strategy. The incumbent, confined to land lines since 2001, is negotiating the purchase of O2 and EE from their respective owners, Telefonica and the Deutsche Telekom-Orange partnership.

The cost of each transaction is estimated between £9-11 billion sterling. Is it a simple rumor or real information? The discussions were confirmed by Lefigaro.fr, reporting that the decision will be made before Christmas:

Orange and Deutsche Telekom, co-owners of EE, number one mobile in the U.K., confirmed discussions last week with BT, which is also in talks with the parent of O2 Telefonica.

If these mergers are allowed from a legal point of view, they bode well for the positive impact on the macroeconomic and microeconomic level and they are expected to revive investment in the sector. Taking the consolidation of two German operators as an example, Zonebourse.com explains the internal economic benefits generated by this kind of transaction:

The collaboration is important: the merger of two smaller German mobile operators (E + Telefonica Deutschland) should allow them to save €4.5 billion and restore profitability. The EBITDA margin for the merged entity goes back to 27-34%.

Fabienne Schmitt, the head of Numericable, will spark conversations about the sector. In a recent article, he talks about the whirlwind of acquisitions by French businessmen: 

In a little over a week, Patrick Drahi completed the acquisition of SFR. The same day, the competition authority gave him the green light to seize Virgin Mobile. He has barely had time to assimilate these assets and he's already ready to buy Portugal Telecom! The total bill: €24 billion spent in just a few months. But that's not all since his company Altice is now salivating for Bouygues Telecom, which is not yet for sale. Patrick Drahi - are your eyes bigger than your stomach? 

This has been a more eventful year than usual in the European telecommunications sector, but it remains to be seen if it will actually stimulate the economy on the old continent. 

One2Team, project management solutions provider, works with several Telecommunications companies in their deployment projects and IT project management. To learn more, click here

 

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