Europe’s telecom companies could soon be getting what they have long been begging for: looser EU competition rules that would finally allow them to consolidate and boost profitability.
Jean-Claude Juncker, a leading candidate to become the next European Commission president this year, said the EU had to rethink its competition rules for the digital sector to allow dealmaking to occur more freely across the bloc.
Speaking during his European-wide campaign trail in Finland, Mr Juncker said: “A first thing we should do is rethink the application of our competition rules in digital markets.”
Opening the door to consolidation in the fragmented European telecoms market would be key for the industry, which has repeatedly lobbied the commission for an easing of competition rules.
“We share Juncker’s view that the priority of the new Commission should be to bring Europe back to economic growth and that the new agenda for a digital Europe should facilitate private investments and innovation,” Luigi Gambardella, chairman of Etno, Europe’s largest telecom industry body in revenue terms.
The favoured candidate of Europe’s centre-right parties to become Commission president added that given recent EU moves to abolish roaming charges across the 28-country region it made sense to allow takeovers regardless of whether they took place within the same member state or not.
“If we ask companies to offer their networks and services no longer only nationally, but on a continental scale, we should in my view also apply EU competition law with a continental spirit.”
In March, 10 leading telecom operators including Orange, Deutsche Telekom, Telecom Italia, Telefónica, Vodafone and Hutchison Whampoa wrote to Neelie Kroes, Europe’s digital commissioner, demanding softer antitrust rules.
The EU’s competition watchdog has still to decide whether to allow the mergers in Germany between Telefónica and KPN’s E-Plus, in Ireland between Hutchison’s Three and Telefonica’s O2; and in France between Altice and SFR.
European competition regulators have generally sought to maintain at least four telecoms operators in every major market, with the fourth and smallest normally setting the price at the lower end.
This has benefited consumers with lower prices across Europe but companies in the sector have complained that lower revenues have stifled investment in networks and innovation at a time when rivals in the US and Asia have grown strongly.
Joaquín Almunia, EU competition chief, has opposed national consolidation that reduced the number of mobile operators to less than four, arguing that a fall in competition would increase prices and reduce quality.
One telecoms executive said Mr Juncker, Luxembourg’s former prime minister, appeared to be talking a different tack from previous EU leaders.
This is a theme also emerging in individual European counties, with senior government figures in France, for example, now supporting attempts to reduce competition in a country with some of the lowest prices in Europe.