• Telefónica’s Marc Murtra wants to see the creation of European tech giants to take on China and the US
• Telenor CEO sees potential consolidation opportunities in Denmark and Sweden
• But not everyone in Europe agrees with the consolidation mantra

European telecoms leaders this week reiterated calls for further network operator consolidation in the region, drilling down on the oft-repeated message that the region is falling behind in the technology race and allowing China and the US to stretch further ahead in new technologies, such as artificial intelligence and more.

Telefónica’s executive chairman Marc Murtra, who has been pleading with regulators to facilitate M&A since he joined the Spanish group in January, made use of an annual gathering of business and political leaders in Spain to call for the creation of “great European technology companies” in order to redress the regional balance. 

According to a report from La Vanguardia, Murtra told the audience at the 40th meeting of the Cercle d’Economia that “fragmentation affects the effectiveness of deployment; let’s remove the brakes of regulation”.

“In Europe, we have everything we need, except scale. That’s why companies need to consolidate. It will entail costs, but the aggregate is positive for the creation of technology and knowledge,” he said.

Murtra reportedly declared: “Europe led the telecommunications industry 25 years ago. Its standards and models were implemented worldwide, but we have become obsolete.”

Positive climate for M&A?

Meanwhile, Benedicte Schilbred Fasmer, who like Murtra is a relative newcomer to the telecom sector having been appointed CEO of Telenor last December, also said she thinks there is a need for scale in Europe, “particularly now, when we see the need for larger investments and better networks, and that bides for opportunities to actually do some in-market consolidation”.

Speaking during Telenor’s earnings call for its first-quarter results, Fasmer said that “to the extent that those opportunities arise, we will certainly try to be active in that space. And for us in the Nordics, it’s particularly in Denmark and in Sweden where we would see those opportunities potentially coming up.”

In Denmark, for instance, the market is served by four players – Telenor, TDC, Telia (now owned by energy and telecom group Norlys) and Three Denmark. (Notably, Telenor and the former TeliaSonera abandoned efforts to merge their Danish operations in 2015 because of opposition from European regulators.)

Sweden also still has four players, with Telenor, Telia, Tele2 and Three Sweden (part of CK Hutchison’s telecom empire). It was reported in 2023 that Telenor and Hong Kong-based CK Hutchison were in talks over merging their respective operations in Denmark and Sweden, although seemingly without reaching any kind of agreement.

“Deals or in-market consolidation would have to be approved both by local authorities in each country, as well as at EU level when it comes to the Nordic countries. And we think there might be a more positive climate for those types of in-market consolidations now than there has been before,” Fasmer said, citing the recent approval of mergers in Spain (with MásOrange formed by the combination of Orange Spain and MásMóvil) and the UK, where Vodafone and Three are combining their businesses.

Indeed, in January the European Commission issued a Competitiveness Compass that, among other things, calls for “revised guidelines for assessing mergers so that innovation, resilience and the investment intensity of competition in certain strategic sectors are given adequate weight in light of the European economy’s acute needs”.  

This follows last year’s publication of three key reports: The high-profile Future of European Competitiveness report from politician Mario Draghi; the Commission’s whitepaper intended to lay the foundations of a new Digital Networks Act; and a report by former Italian Prime Minister Enrico Letta on the future of the European single market.

Not everyone in Europe is convinced by calls for leniency on consolidation in the region, though. For instance, the national competition authorities of Austria, Belgium, Czech Republic, Ireland, the Netherlands and Portugal recently signed a joint statement that says M&A within a single EU member state continues to require careful scrutiny.

“The narrative that fragmentation in the electronic communications sector, hindering investment and innovation, allegedly results from unduly strict competition rules is misplaced. In fact, lax merger control could not only undermine consumer welfare directly but also investment and innovation,” the statement said.

- Anne Morris, Contributing Editor, TelecomTV