Deutsche Telekom CEO: It's time to merge in Europe

For European operators thinking of mergers and acquisitions, now is the time to make their move, according to comments made this week by the CEO of Deutsche Telekom, Rene Obermann.

In an interview with Bloomberg, Obermann said even his company, which is the second-largest telecoms operator in Europe, is "too small in the long run for competing internationally" and said the cooperation with Orange on purchasing and network use in some markets is "a start" and could act as a model for other European companies.

Bloomberg also calculated that there have been 161 deals targeting European telecoms and cable companies announced or completed already this year. For example, Liberty Global bought Virgin Media for about $16 billion. Vodafone Group acquired Kabel Deutschland Holding AG for €7.5 billion, and KPN shareholders have approved the €8.55 billion sale of its German E-Plus business to Telefónica to create the country's largest mobile operator by customers.

Companies from outside of Europe have also been eyeing up possible opportunities, with AT&T rumoured to be interested in Vodafone. However, Carlos Slim's failed attempt to increase his stake in Dutch operator KPN to a majority highlights that M&A attempts in Europe are far from plain sailing.

It's also not clear what the future stance of the European Commission will be towards M&A: deals such as the E-Plus sale and Hutchison Whampoa's acquisition of Telefónica Ireland are being watched with interest to see if they get approved, and what conditions would be attached to ensure approval.

Analysys Mason recently noted that eight mobile in-market consolidation deals have taken place in Western Europe during 2005–2013, including Telefónica/KPN in Germany and Hutchison 3G Ireland/Telefónica in Ireland.

The analysis company added that mergers have mainly taken place between third and fourth players, but noted that an easier regulatory environment in Western Europe in the future might lead to more consolidation activity by incumbents, as a means of achieving sustainable margins, cash flow and investor return in large markets.

For more:
- see this Bloomberg article

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