The German Telecom Pavilion of Mobile World Congress held in Barcelona, Spain.
Angel Garcia | Bloomberg | Getty Images
BARCELONA – European telecommunications companies are stepping up calls for more industry integration to help regions compete more effectively with superpowers like the US and China with key technologies such as 5G and artificial intelligence.
Last week, at Barcelona’s Mobile World Congress (MWC) trade show, CEOs of several telecommunications companies called on regulators to combine them with other businesses to make it easier to reduce the total number of carriers operating across the continent.
Currently, there are a large number of telephone company players operating with non-EU members, such as in multiple EU countries and the UK, but Telco’s chief told CNBC that this situation is unacceptable as it cannot effectively compete in terms of price and network quality.
“If we invest in technology, deep know-how and bring dramatic change to Europe, we need scale just like other large tech companies have done in the US or we see today,” Marc Murtra, CEO of Spanish telecom giant Telefonica, told CNBC’s Karen TSO in an interview.
“To be able to capture scale, we need to consolidate fragmented markets, such as the European telecom market,” Murtra added. “And to that end, we need regulations that allow us to integrate. So what we ask is that we unleash us. Let’s get scale. Invest in technology and make productive change.”
Christel Heydemann, CEO of French Career Orange, said that while some megadele activities begin to gather pace in Europe, there is a need to do more to ensure the continent’s competitiveness on the world stage.
Last year, Orange signed an agreement to integrate its Spanish business with local mobile network provider Masmovil. Meanwhile, the UK’s Competitive Markets Authority has recently approved a £15 billion ($19 billion) merger between telecommunications company Vodafone and the UK’s three people, subject to certain conditions.
“We have been actively promoting integration in Europe,” Orange’s Haydemann told CNBC. “We’re seeing things change now. There’s still a lot of hope.”
However, she added: “I think there’s a lot of pressure in Europe to change things from the business environment of political leaders. But in reality, things haven’t changed yet.”
In a fiery keynote speech on Monday, Timhöttges, CEO of German Telco Deutsche Telekom, said that other telco companies markets, such as the US and India, have only been condensed into a handful of players.
The US telephone company is dominated by the three largest mobile network operators: Verizon, AT&T and T-Mobile. T-Mobile is majority owned by Deutsche Telekom.
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A chart that compares the stock price performance of T-Mobile, the largest mayor in the United States with market capitalization, and a chart of German Deutsche Telecom and French Orange.
“We need to reform our competition policy,” Hetzges said on the MWC stage. “We must be allowed to integrate activities.”
“There’s no reason why every market must operate with three or four operators,” he added. “We need to build a single European market… because if we can’t raise consumer prices, if we can’t bill over the top players, we need to get efficiency from the size we create.”
“Over-The-Top” refers to media platforms such as Netflix that deliver content over the Internet, and bypasses traditional cable networks.
Focusing on European competitiveness
From AI to next-generation 5G networks, European telecoms have invested heavily in new technologies to move beyond the legacy model of laying cables that allow for internet connectivity.
However, this costly effort in modernization has come alongside revenue growth slowing and sectors failing to effectively monetize networks to the same extent as the advent of mobile applications.
At MWC, many mobile network operators have used AI to improve the quality of their networks, serve their customers, and gain market share from their competitors.
Still, the boss of European telephone companies says that if allowed to pair with other large multinationals, it could accelerate the journey of digital transformation.
“There’s this real focus on European competitiveness,” Luke Kehoe, a European industry analyst at network intelligence firm Ookla, told CNBC last week about MWC’s bystanders. “We have a goal to mobilize policies to improve communications networks.”
In January, the European Commission, the European Union’s executive body, issued the so-called “competitiveness compass” to EU lawmakers.
This document calls for revised guidelines for evaluating mergers, particularly so that the intensity of innovation, resilience and competitiveness in a particular strategic sector can be given sufficient weight in light of the keen needs of the European economy.
Meanwhile, last year, former European Central Bank President Mario Draghi released a long-awaited report urging the EU to radical reforms through a new industrial strategy to ensure competitiveness.
It also calls for new digital networking laws that will help carriers build next-generation mobile networks, reduce compliance costs, improve end-user connectivity, and improve incentives to harmonize EU policies across the network spectrum.
“The common theme and mood music certainly is about reducing ex-Ante’s regulations and promoting what we call the environment a more competitive environment. “I think moving forward will result in more integration.”
But the telco industry has some way to see transformative cross-border mergers and acquisitions, Kehoe added.
For many telco analysts, the demand for increased consolidation is nothing new.
“The CEOs of European telephone companies weren’t embarrassed to seek integration and growth-friendly regulations,” Nik Willetts, CEO of the Telco Industry Association TM Forum, told CNBC. “But regulations are just one part of the puzzle.”
“In the last 12 months, we have seen new energy from our European members, continuing our enormous tasks to transform ourselves. We simplify, modernize and automate its operations and legacy technologies.”
“This will allow us to quickly adapt to new customer needs and market realities, such as building new partnerships, implementing M&As, delaying integrated businesses, and more. There are all the trends that we expect to reach new heights in the next 24 months,” he added.
