Telecom Leaders Urge EU to Relax Merger Rules as Global Markets Drive Growth

According to The Financial Times, the comments were made during this week’s Mobile World Congress in Barcelona, where telecom leaders gathered to discuss industry challenges and opportunities. Vodafone and Orange emphasized that, in the face of sluggish growth in Europe, these external markets are proving to be vital to their expansion strategies.

Vodafone, in particular, has seen strong performance in Africa and Turkey. The company reported an 11.6% increase in organic service revenue from its African operations, compared to a 6.4% decline in Germany, its largest market. In a statement to The Financial Times, Vodafone’s CEO, Margherita Della Valle, highlighted Africa’s potential for scale, citing the typical market structure of just three major operators, which allows for better competition and growth opportunities. As a result, Africa now accounts for 20% of Vodafone’s total group revenue.

Della Valle also pointed to Vodafone’s upcoming merger with Three’s UK business as a key example of how market consolidation can foster growth. This deal, which is expected to proceed with regulatory approval, hinges on Vodafone and Three committing to an £11 billion investment in the UK’s 5G infrastructure.

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Meanwhile, Orange has also been focusing on growth outside of Europe, particularly in the Middle East and Africa. According to Orange CEO Christel Heydemann, these regions have become “core pillars” of the company’s growth strategy. In contrast to a modest 2.1% decline in European revenues, Orange’s Middle Eastern and African operations posted an impressive 11.1% revenue increase last year.

The telecom sector in Europe has faced persistent challenges, with a report by Connect Europe revealing a 4.4% decline in real-term revenues in 2023. These struggles have led telecom groups to press for regulatory reforms, particularly when it comes to mergers. Six major telecom companies, including Telefónica, Nokia, Deutsche Telekom, and Ericsson, have called on the European Commission to relax current merger rules. They argue that consolidating operators—reducing the number of players from four to three—would enable telecom firms to make more substantial investments in areas like 5G.

At the Mobile World Congress, Deutsche Telekom CEO Tim Höttges stressed the need for a shift in the EU’s regulatory stance, suggesting that Europe “needs a DOGE” to effectively address overregulation in the telecom sector. Telefónica’s Marc Murtra echoed these concerns, warning that Europe’s global position could continue to decline unless the EU responds to the industry’s call for regulatory change.

The telecom industry has long contended that the EU’s regulatory framework, which makes it difficult to approve mergers that would reduce competition, is hindering growth. Operators claim that this fragmented market structure makes it difficult to achieve the scale needed to invest in advanced technologies, such as 5G networks.

The push for policy change follows a report from former European Central Bank President Mario Draghi, which urged the EU to encourage more mergers within the sector. As reported by The Financial Times, Draghi criticized the EU’s approach, noting that while innovation is often championed, European telecoms continue to face mounting regulatory obstacles. His report has led European Commission President Ursula von der Leyen to direct Teresa Ribera, the Commissioner for Competition, to review the EU’s horizontal merger guidelines.

Source: The Financial Times