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Brussels has signaled it is open to European telecoms mergers to help finance 5G rollouts and upgrade aging networks, in what is likely to be seen as a softening of approach after regulators canceled several potential deals in the last years.
Europe’s largest telecoms groups have asked the European Commission to help them invest billions in the deployment of 5G and full-fibre networks, including through consolidation in the market and demanding that Big Tech groups pay a “fair” contribution for the use of their networks.
According to a draft white paper seen by the Financial Times, the commission found that “fragmentation [of the sector] could impact the ability of operators to reach the scale necessary to invest in the networks of the future, particularly in view of cross-border services”.
The regulator said it recognizes that while a competitive telecommunications market is a benefit to consumers, “industrial competitiveness and economic security” should be taken into account when considering industry consolidation.
The highly anticipated digital infrastructure report, which will set out Brussels’ thinking on how to build resilient digital networks, is due to be published next week and is being considered by the EU executive.
While its recommendations will not be legally binding, telecoms operators said Brussels’ comments signal it is willing to consider further mergers in the sector to fill a funding gap. This comes after the Commission said last year that telecoms groups had been told they would have to spend up to 50% of their annual revenues over the next five years on investing in areas such as infrastructure.
“Creating a truly single market for telecommunications services requires reflection on how to encourage cross-border consolidation,” Thierry Breton, the European commissioner responsible for the single market, told the FT.
“Scale is key to making the huge investments needed to build the cutting-edge digital infrastructure that Europe needs for its competitiveness. There are still too many regulatory barriers for a true single market in telecommunications,” she added.
Those familiar with the EU’s thinking say the document will reignite the debate on telecoms consolidation after years of concern over entanglements that lead to rising prices for consumers. Brussels has blocked big deals before, including CK Hutchison’s £10.5 billion attempt to buy O2 in 2016.
The Commission is preparing to announce its decision on whether to complete the proposed €18.6 billion joint venture between Orange and MasMovil in Spain as early as next week. The case has been closely watched by the industry as a test case for further consolidation in the bloc.
Europe’s largest telecoms groups have also called on the EU to force Big Tech to pay a “fair” fee for the use of their networks. The CEOs of 20 companies, including BT and Deutsche Telekom, signed a letter to the Commission and members of the European Parliament about the initiative last year.
In the draft document, Brussels says it may need to take action to ensure that all actors, including big tech companies, pay for the use of the infrastructure they use, “to ensure a regulatory level playing field and equivalent rights and obligations for all actors”. .
Subsea connectivity and cables also pose a “challenge to EU resilience”, the Commission said in the draft document.
He added that incidents such as those in the Baltic Sea – which appear to relate to a gas pipeline leak and a broken data cable between Finland and Estonia in 2022 – demonstrated the bloc’s vulnerability.
From October, a new directive will require member states to adopt policies relating to the cybersecurity of infrastructure such as undersea cables and to ensure the protection of “vital security interests” from sabotage and espionage, according to the draft.
The “NIS 2” directive will also apply to other entities that may operate submarine cables such as cloud service providers or data centers.
The document adds that studies conducted by the Commission have found that the EU lacks accurate mapping of existing infrastructure, common governance of cable technologies and cable laying services, as well as ensuring “rapid” repair and maintenance and safe” of the cables.
He said the Commission could also “consider an equity instrument designed to support” cable projects of European interest.