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Pan-European telco consolidation seen in three to four years

Operators will build scale necessary to fend off Internet giants, content providers, new report predicts.

Pan-European consolidation between incumbent operators is likely to happen in coming years, according to a new report by Arthur D. Little (ADL) and Exane BNP Paribas.

"Some players believe that scale will be an important advantage against rising Internet giants and content providers," said Jean-Luc Cyrot, co-author of the report and a director at ADL's TIME practice.

But the first stage will be domestic consolidation between local access players. Cyrot predicted.

"There will be no pan-European consolidation in the short-term, for sure. We're looking at the next three to four years," he said.

"Of course we don't know exactly when it will start, but first of all we expect a typical market with, say, seven fixed and mobile operators to consolidate into four in the next 18 to 24 months," commented Antoine Pradayrol, head of telecom at Exane BNP Paribas and co-author of the report.

"It will be an opportunistic move that triggers it," added Cyrot.

Earlier last week Hutchison Whampoa chairman Li Ka-shing revealed that he is in talks with a number of interested parties over the sale of the group's 3 Italia unit, although he did not share any further details.

Cyrot noted that consolidation could be bad news for equipment providers.

"[European] vendors have already consolidated themselves to improve their balance sheets. They don't want their customers to start doing that because they will have increased buying power," he said.
 

According to the ADL report, the alternative for operators without the scale needed to compete is to focus on what it calls 'access specialisation', which effectively means becoming a bit pipe provider.

"There are benefits," insisted Pradayrol. "If you open up your network you create demand for more service providers, which might trigger further consolidation," he said.

"It's not such a big deal if there are only three pipes because each one would be very profitable," commented Cyrot.

However, he warned that regulation could pose a threat to that profitability.

"Regulators could force the access fees down and tighten up the margins," said Cyrot.

"However, if operators invest heavily in content and services then they could destroy its value – it's a risky ambition to be more than a bit pipe," added Pradayrol.

Источник: Total Telecom

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