Telecom industry optimistic as European Commission initiates M&A discussion

The European Commission (EC) has recently fast-tracked its reassessment of merger guidelines in response to lobbying pressure from various companies, including telecommunications firms. This public consultation, lasting only four months, aims to reconsider the regulations on mergers and acquisitions, with a focus on factors such as innovation, efficiency, sustainability, competition, and investment intensity in strategic sectors.

Telcos in Europe have been advocating for relaxed M&A rules, emphasizing the benefits of increased national and regional scale through mergers. They argue that consolidation can lead to greater innovation and investments, rather than solely focusing on reduced competition and potential price hikes for consumers. Reports from influential figures like Mario Draghi and Enrico Letta have reinforced these calls for regulatory changes in the telecom industry to accommodate the evolving market dynamics.

The EC consultation will address key topics relevant to the telco sector, including competitiveness, resilience, market power, innovation, decarbonization, digitalization, efficiencies, and labor implications. Teresa Ribera, the EU’s executive VP for a clean, just, and competitive transition, is leading efforts to modernize competition policy to support European companies in global competitiveness. She highlights the importance of enacting laws that encourage innovation, competition, and enforcement actions against anticompetitive behaviors under the Digital Markets Act.

Ribera views this consultation as a critical moment for Europe, where stakeholder feedback will shape the future of merger control policies to benefit consumers, drive innovation, and enhance Europe’s resilience and leadership. Telcos are expected to advocate for regulatory changes that facilitate industry consolidation, enabling substantial investments in network infrastructure and emerging technologies. However, despite their persistent requests for more relaxed M&A rules, it is unlikely that there will be drastic changes to Europe’s existing regulations, which have remained relatively unchanged since their introduction in 2004.

Notably, there are dissenting voices urging caution against deregulation. National competition authorities from several EU member states have issued a joint statement emphasizing the importance of maintaining stringent competition rules to avoid reducing the number of players in the market. They argue that a competitive landscape fosters service quality, network coverage, innovation, and supply security, contrary to claims that strict competition regulations hinder investment and innovation in the telecom sector.

As the consultation progresses, tensions may arise between proponents of relaxed M&A rules and those advocating for strict competition measures. The outcome of this review process could potentially shape the future of telecommunications regulation in Europe, impacting industry dynamics and consumer interests. Despite differing viewpoints on regulatory changes, stakeholders across Europe are invited to provide input and shape the evolution of merger review frameworks to align with the evolving needs of the industry and economy.