(Bloomberg) — The European Union should consider consolidation for telecom operators as a way to improve the bloc’s mobile and landline networks and should further integrate its energy markets, according to a report it commissioned on competitiveness.
The telecom concession, which is part of a report that former Italian Prime Minister Enrico Letta is presenting to EU leaders on Wednesday, is a victory for operators who have argued for years that the sector is ripe for mergers in some countries to provide the growth and scale needed to fund network upgrades.
“Due consideration should be given to the need for some level of consolidation within national markets or strategic alliances between market players including pro-competitive sharing of investments in key network elements,” the document said, according to a draft seen by Bloomberg.
On energy, Letta said the EU should further integrate its market through steps such as developing green bonds and joint purchases of critical minerals. That would help it gain the leverage and economic weight needed to ensure secure supplies and keep businesses investing in the region, he wrote.
Letta’s report only deals with issues within the EU’s single market and by itself does not change any regulation or competition policy. Bloomberg reported earlier that he will also suggest that EU leaders consider changing the bloc’s strict state aid rules by creating a new mechanism to finance projects that span across member states.
Telecommunications Concerns
Telecom operators hope that the next European Commission, which will be formed after the bloc’s elections in June, will propose a new law that addresses these concerns.
While regulators insist there is no magic number of firms in national telephone markets, deals cutting competition to three companies in a country have often struggled to win approval. That situation has frustrated companies looking to expand operations across the 27-nation EU and recoup massive investments in infrastructure and wireless spectrum.
However, there were signs that the rules were changing. The Spanish unit of Orange SA and Masmovil Ibercom SA won conditional approval this year to form the country’s largest operator.
The commission earlier this year published another report which detailed problems with the EU telecoms market and addressed how operators are failing to return their network investments. That article did not encourage intra-market consolidation but rather proposed cross-border mergers to create pan-European players.
The commission was too favorable to new market disruptors, according to Letta’s draft report.
“Today, maintaining the focus only on pro-entrant regulation would be detrimental to a technological shift to advanced networks that require massive investments,” the report said.
Energy Risks
As the 27-nation EU emerges from an unprecedented energy crisis and faces new geopolitical risks and strengthening international competition in clean technologies, it cannot waste time, Letta wrote.
“No single member state can compete with the United States on gas or oil prices, as they are the world’s largest fossil fuel producer,” the draft said. “Nor can Europe replicate some of the advantages that China’s state-owned economy can deploy. But the EU has a continental-scale energy market unified by a modern, sophisticated regulatory framework unmatched around the world.”
In order to deepen integration and make Europe’s various systems a competitive asset, the region must muster the political will and take some decisive steps, it said. Letta’s recommendations include:
More stories like this are available at bloomberg.com
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Published: 16 Apr 2024, 23:23 IST
(tagsTo Translate)Bloomberg