{"id":11992,"date":"2023-09-01T11:12:17","date_gmt":"2023-09-01T11:12:17","guid":{"rendered":"https:\/\/mysourcefunding.com\/leadership\/eu-must-balance-telecoms-market-consolidation-and-competition-to-avoid-falling-behind\/"},"modified":"2023-09-01T11:12:18","modified_gmt":"2023-09-01T11:12:18","slug":"eu-must-balance-telecoms-market-consolidation-and-competition-to-avoid-falling-behind","status":"publish","type":"post","link":"https:\/\/mysourcefunding.com\/?p=11992","title":{"rendered":"EU Must Balance Telecoms Market Consolidation And Competition To Avoid Falling Behind"},"content":{"rendered":"
\n

Paulina Velasco<\/p>\n

Hitting its one-year mark earlier in August, the US CHIPS and Science Act has already attracted $166 billion in semiconductors and electronics investment, according to the US Government. A major pillar of Washington\u2019s reindustrialization drive, the CHIPS Act is designed to ramp up US competitiveness and supply chain security in critical sectors, namely through its $53 billion in incentives for semiconductor manufacturing and R&D, as well $1.5 billion in public funding to expand 5G and next-gen telecoms networks.<\/p>\n

The Biden Administration\u2019s aggressive industrial policy has sparked a similar reawakening on the other side of the Atlantic, with the EU moving to prop up its green and digital sectors to keep pace. While industrial heavyweights France and Germany have dominated headlines, Spain has an equally crucial role to play in this bloc-wide effort, particularly as the epicenter of consolidation in Europe\u2019s telecoms market.<\/p>\n

Madrid\u2019s status could soon be reinforced, with Iberian telco behemoth Telef\u00f3nica reportedly proposing Vodafone Spain a fiber network partnership. This consolidation could provide the financially faltering Vodafone much-needed relief from the squeeze of the Spanish telecoms market \u2013 arguably Europe\u2019s most competitive as a plethora of low-cost brands continue to drive prices down.<\/p>\n

Given this situation, Telef\u00f3nica COO \u00c1ngel Vil\u00e1 has long called for the consolidation of Spain\u2019s fragmented market, an aim sometimes challenged by Brussels regulators on competition grounds. Yet the EU should find compromise solutions that unlock the economic benefits of having European telco champions, while ensuring competition guardrails do not expose the market to unforeseen threats.<\/p>\n

<\/fbs-ad><\/p>\n

Pooling resources to keep pace <\/strong><\/p>\n

As in Spain, the broader European telecoms market is highly fragmented, with over 100 mobile network operators struggling to keep pace with competitors in the US and China. Compared to the US \u2013 whose three main mobile operators have rolled out 5G networks much faster than in the EU \u2013 much smaller European countries have up to four operators, many of which face mounting debt, shrinking profits and intense pressure to invest in next-generation networks despite weak returns.<\/p>\n

Telecoms market analysts have posited that reducing the number of operators in European countries via consolidation would make the sector more financially robust and resource-efficient, thus unlocking higher levels of investment in advanced network technologies that the bloc needs to compete with its international rivals. For this reason, Spain has been using its six-month EU Council presidency to push for accelerated market consolidation, a policy agenda shared by the EU.<\/p>\n

Spanish Telecommunications Secretary Mar\u00eda Gonz\u00e1lez Veracruz clarified Madrid\u2019s goal of driving forward the \u201cregulatory changes and necessary decisions\u201d that the bloc\u2019s leading operators need \u201cto compete in the global market,\u201d adding that Spain would support consolidation in “every way it can,\u201d in an April statement. Furthermore, digital and competition Commissioner Margrethe Vestager has lamented how \u201cexcessive competition\u201d has slashed prices and investment returns for European telcos, while calling for \u201ccontinental level\u201d consolidation.<\/p>\n

Reconciling competition and consolidation<\/strong><\/p>\n

While the continent\u2019s largest telcos \u2013 including Vodafone Group and Orange \u2013 have already bought up smaller players in their local markets, they have traditionally shied away from merging with each other. However, this could soon change.<\/p>\n

The proposed merger inked in late July between MasM\u00f3vil and Orange, two of the biggest telcos operating in Spain, represents an enormous consolidation leap. This \u20ac18.6 agreement would create a full-fledged Spanish juggernaut, with industry analysts notably speculating that it could lay the foundation for similar developments across the continent. Yet the merger has already run into regulatory trouble, with the European Commission expressing concerns that this consolidation would reduce competition in Spain and increase consumer prices.<\/p>\n

With the Commission\u2019s investigation ongoing, Orange is taking action to alleviate Brussels\u2019s fears ahead of the EU executive\u2019s final decision this autumn. In late July, the French telco opened talks with the Commission concerning the transfer of remedies, and more specifically, assets in its retail business \u2013 the object of the Commission\u2019s fair competition reservations \u2013 to secure the greenlight for its MasM\u00f3vil merger. Crucially, this compromise would help an ailing market consolidate while preventing Orange from excessively corning the market.<\/p>\n

Beware unintended consequences<\/strong><\/p>\n

However, in its bid to protect consumers and competition, regulators should closely consider which firms could snap up Orange\u2019s assets. For example, Digi Spain, a Romanian telco that has experienced dizzying growth in Spain in recent years, is already waiting in the shadows.<\/p>\n

As part of its growth plan, this low cost operator has its sights set on snapping assets from Orange \u2013 a concerning development given Digi\u2019s numerous issues that could undermine the investment climate and consolidation of Spain\u2019s telecoms market. Spanish business newspaper Cinco D\u00edas has recently cautioned that Digi’s aggressive \u201cprice wars,\u201d would not only come from a desire to compete in the market, but also to divert attention from several dark clouds hiding behind Digi\u2019s performance.<\/p>\n

For example, Digi\u2019s auditor, KPMG, has also exposed a series of organizational red flags. In addition to questionable accounting documentation, KPMG\u2019s 2022 financial report highlights Digi\u2019s overly-centralized corporate governance structure as well as the “various judicial and regulatory processes” facing the company, including a corruption allegation in Romania. Crucially, these internal flaws are cultivating mistrust from investors at a time when network investment is sorely needed, making Digi\u2019s potential acquisition of Orange assets a risk that the Spanish telecoms market must be protected from.<\/p>\n

Continent at a crossroads<\/strong><\/p>\n

Regardless of the outcome, the Orange-MasM\u00f3vil merger will likely be a watershed moment for EU telco consolidation, setting the direction of travel for the coming years. With the bloc requiring a significant investment boost in 5G networks and other next-generation technologies to accelerate its twin digital-green transition, the EU should follow the lead of Spain and other strong telco advocates by ensuring its policies help unlock the market\u2019s potential.<\/p>\n

Given its benefits, as well as the avenues for mitigating possible impacts on fair competition, the Commission\u2019s backing of consolidation can play a key role in preventing the continent from falling irreversibly behind the US and other global tech and industrial competitors.<\/p>\n<\/div>\n

Read the full article here<\/a><\/p>\n","protected":false},"excerpt":{"rendered":"

Paulina Velasco Hitting its one-year mark earlier in August, the US CHIPS and Science Act has already attracted $166 billion in semiconductors and electronics investment, according to the US Government. A major pillar of Washington\u2019s reindustrialization drive, the CHIPS Act is designed to ramp up US competitiveness and supply chain security in critical sectors, namely […]<\/p>\n","protected":false},"author":1,"featured_media":11993,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"content-type":"","footnotes":""},"categories":[76],"tags":[],"class_list":{"0":"post-11992","1":"post","2":"type-post","3":"status-publish","4":"format-standard","5":"has-post-thumbnail","7":"category-leadership"},"yoast_head":"\nEU Must Balance Telecoms Market Consolidation And Competition To Avoid Falling Behind | Brandiary<\/title>\n<meta name=\"description\" content=\"Paulina Velasco Hitting its one-year mark earlier in August, the US CHIPS and Science Act has already attracted $166 billion in semiconductors and\" \/>\n<meta name=\"robots\" content=\"index, follow, max-snippet:-1, max-image-preview:large, max-video-preview:-1\" \/>\n<link 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