Orange CEO Richard sees M&A 'earthquake' if German merger goes ahead

Many see the planned merger of KPN's E-Plus business with Telefónica's O2 Germany as a major test case for Europe's and Germany's antitrust commissioners, and Orange CEO Stephane Richard said he believes the deal, if approved, would trigger a massive shift in Europe's telecoms industry.

Stephane Richard, France Telecom Orange

Stephane Richard

"If Germany accepts to go from four carriers to three, it will create an earthquake in Europe," Richard told Bloomberg "It will force other countries to reconsider their positions on consolidation."

Indeed, many believe Europe is in dire need of further consolidation as its 100-plus operators continue to suffer from falling revenue and face competition from third parties that provide free messaging services over their networks.

Richard said Orange, for its part, would want to consolidate its position in countries including Spain and Poland, and would consider buying fixed-line assets in Belgium and Romania in order to bolster its wireless-only operators there.

Richard added that the optimum level of carriers per market looks to be three, not four. Some markets such as the UK have as many as six, although both Orange UK and T-Mobile UK come under the EE umbrella. Austria has just reduced the number of its operators from four to three after Hutchison Whampoa acquired Orange Austria, and Hutchison is also in the process of consolidating the Irish market by buying O2 Ireland.

"Recent deals in the telecoms market have shown that politicians have sometimes under-estimated the reality of our industry, with the heavy investments it entails," Richard added.

Bloomberg noted that other operators looking for partners or share sales include EE, which is owned equally by Orange and Deutsche Telekom, Telecom Italia, which is now seen as a likely takeover target, SFR, which Vivendi intends to dispose of possible via an initial public offering, and Yoigo in Spain.

France itself has seen its mobile market transformed following the entry of a fourth operator; Iliad's Free Mobile introduced cutthroat prices and unleashed a price war that continues to impact the revenues of Orange, SFR and Bouygues Telecom.

At the European Union level, the EU's antitrust chief, Joaquin Almunia, has indicated he is in favour of a less fragmented European market, although his office recently said there is no "magic number" for operators in a region.

For more:
- see this Bloomberg article

Related Articles:
Carlos Slim gives thumbs up to Telefónica's improved E-Plus offer
Slim secures funding for KPN bid, as date gets set for vote on E-Plus deal
Slim's €7.2B move on KPN raises questions about E-Plus deal
Telefónica gets positive signals over E-Plus deal, reports reduced debt
KPN, Telefónica to merge German units in survival plan, but hurdles lie ahead