Europe's telcos fight back over single market plans

Europe's operators joined forces this week in a combined effort to lambast recent European Union proposals for a major reform of the sector, instead calling for greater freedom to consolidate and less oversight over issues such as pricing and network technology.

According to Reuters, leading executives from some of the region's largest operators urged the European Commission to reconsider the proposals outlined by the EU's digital chief, Neelie Kroes, in September. AT&T CEO, Randall Stephenson, also suggested at the same event that Europe should adopt a similar regulatory regime to the U.S. in order to drive further growth, Bloomberg reported.

Speaking at the same European Telecommunications Network Operators' (ETNO) Association summit in Brussels as Stephenson, Orange CEO Stephane Richard warned that the plans to reduce roaming fees and cap prices on cross-border phone calls would deprive companies of the revenue they need to invest in networks, Reuters said.

According to the Guardian, the industry lobby has produced a study claiming the reforms, especially the abolition of roaming charges, will cost the sector €7 billion ($9.46 billion) by 2020.

Richard added that some of the more positive proposals, such as harmonising spectrum allocation across the EU and cutting red tape, could also take years to come to fruition.

"Let's stop talking about the package because in my view it is going to be largely irrelevant," Richard said, referring to the aim of catching up with the U.S. and Asia, according to Reuters. "We need a bit more entrepreneurial regarding consolidation moves."

Deutsche Telekom CFO Timotheus Hoettges also pointed to consolidation in Europe as a key area for regulatory change, although M&A does not fall under Kroes' remit. "We need new rules on competition and antitrust...and there should be complete deregulation in markets that are already competitive," he said, according to Reuters.

Tired of waiting for regulation to change, some operators are now prepared to go ahead with acquisitions in order to force regulators to show what they are prepared to accept. For example, Vodafone agreed to buy German cable company Kabel Deutschland this year and Telefónica is attempting to buy KPN's German unit, E-Plus. The latter deal is viewed by many in the industry, including Orange's Richard, as a bellwether for consolidation

"The regulation event has proven to be so inordinately time-wasting and frustrating and dead-end that you're starting to see companies act," Sanford C. Bernstein analyst Robin Bienenstock told Bloomberg. "The regulations are so lousy that people are starting to act in spite of it."

Deutsche Telekom's Hoettges said all of Europe's major operators would have to combine to come even close to matching the size of AT&T, which has a market value of $175 billion. "We cannot compete in our environment anymore," added Hoettges, Bloomberg reported. "Europe is at a scale too small to be relevant."

Meanwhile, AT&T's Stephenson called for rules to be changed to stimulate growth markets such as mobile broadband, with a particular emphasis on more consistent spectrum policies. He said regulators should stop allocating specific technologies such as 3G to certain airwaves and allow operators to swap spectrum to increase flexibility. Furthermore, he wants a change in spectrum ownership rules to enable operators to control airwaves for 30 years or more, instead of the 10-12 years currently prevalent in Europe.

"How you manage spectrum policy will determine how much investment comes to Europe," Stephenson said, according to Bloomberg. He still declined to comment on any potential acquisitions AT&T may be pursuing in Europe. Vodafone has frequently been cited as a possible target for AT&T, particularly since the UK-based company said it plans to sell off its 45 per cent stake in Verizon Wireless.

"Regulatory flexibility has helped the U.S. take world leadership on technology," Recon Analytics analyst (and FierceWireless contributor) Roger Entner told Bloomberg. "Right now I think European regulators would welcome AT&T coming to Europe, given the investment intensity they've shown in the U.S."

Kroes, who wants to push through her proposals by next spring, maintained her stance by saying operators should embrace her plan despite the tough roaming proposition because it would "create a predictable environment for investment for the first time in years," Reuters reported. "My proposals are about making the pie bigger so let's not fight about the crumbs," she said at the conference.

"You can't pick which bits you want from the menu. This isn't a restaurant," she added, according to the Guardian.

Bloomberg reported that Kroes said she believes her proposals could in fact help rather than hinder consolidation. "We have listened to industry concerns, so that pan-European deals can come onto the market, sustainably, available for all as soon as possible," she said, Bloomberg reported.

For more:
- see this Reuters article
- see this Bloomberg article
- see this separate Bloomberg article
- see this Guardian article
- see this FT article (sub. req.)

Related Articles:
European regulators unimpressed with Kroes' single market plans
EU's 'Connected Continent' proposal draws muted response, but analysts upbeat
Kroes pushes through plans for EU single market
Kroes insists roaming fees will end, despite report to the contrary