Orange executive says European MNO consolidation on ice for at least two years

Orange's European head said the European Commission has effectively put the stoppers on mergers in the region's telecom sector for at least two years, after competition commissioners blocked a planned merger of Three UK with O2 UK.

Gervais Pellissier, executive director in charge of Orange's European operations and also the company's deputy CEO, said the operator has ruled out any major in-country or cross border deals for the foreseeable future as a result of the EC's hardening stance on such deals, the Financial Times reported.

However, Pellissier noted that consolidation in European markets could be back on the table in the medium term, and that future deals could be bigger than recent attempts.

The Orange executive added that the EC's tough stance on in-country consolidation impacts on the ability of national competition authorities to make their own decisions on the pros and cons of proposed mergers, the FT stated.

Pellissier also revealed that recent merger talks between Orange and Bouygues Telecom mostly fell apart due to a lack of trust between the companies involved, the FT reported.

The view was fleshed out in a related article by the Wall Street Journal, which explained that Pellissier was referring to talks with other French operators regarding how to share out Bouygues Telecom's assets if a merger went ahead.

Europe's operators believe consolidation is essential to free up the funds required to build out next-generation networks.

The view was summed up by CK Hutchison in a statement issued after the EC blocked its planned deal in the UK. "We strongly believe that the merger would have brought major benefits to the UK, not only by unlocking £10 billion [€12.9 billion/$14.4 billion] of private sector investment in the UK's digital infrastructure but also by addressing the country's coverage issues, enhancing network capacity, speeds and price competition".

While the EC previously approved deals in Austria, Ireland and Germany that cut the number of full MNOs from four to three, it is concerned that those mergers have actually resulted in higher prices and less choice for consumers rather than improving the market.

For more:
- see this Financial Times report (subscription required)
- read this Wall Street Journal article

Related articles:
Report: Telefónica favours keeping O2 UK after failed Hutchison sale
Reports: Sky could play key role in future O2 UK, Wind Italy deals
Three is no longer a magic number in EU telecoms
EC blocks proposed O2/Three UK merger; CK Hutchison considers legal challenge
European Commission takes a tough line on MNO consolidation - Year in Review

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