* Talks with EU about mergers, not single network-sources
* Almunia wants genuine single telecoms market
* Fragmented industry needs investment in faster networks
By Claire Davenport
BRUSSELS, Jan 9 European telecoms operators want
more consolidation in a crowded market, industry sources said on
Wednesday, but have not discussed creating a single network for
the continent with competition authorities in Brussels.
Telecoms shares rose on Wednesday after the Financial Times
reported that leading firms had explored the creation of "a
pan-European infrastructure network" to unite fragmented
national markets with EU Competition Commissioner Joaquin
A spokesman of Almunia confirmed he wanted a "genuine single
market" in telecommunications rather than the present patchwork
of national companies and subsidiaries.
However, the sources said a meeting of industry officials
with Almunia late last year had focused on whether the large
number of European operators could be reduced through mergers
and takeovers - deals that often run into problems with national
and European Union competition authorities.
Sources familiar with the meeting on Nov. 28 said any talk
of establishing a single European network was still theoretical.
"The talks were centred in consolidation in Europe and in
sharing networks, and not in a single market or in a single
telecoms network in Europe," said one source.
Telecoms firms need to attract heavy investment in faster
networks, something which is difficult in a market with so many
players. Many firms are also struggling with diving revenue
brought on by new regulations and tough competition from
Internet players such as Google and Apple.
More than 1,200 firms offer fixed line services in Europe
while over 100 operate mobile phone networks. A further 200 plus
offer mobile services by renting space from network operators.
Executives from Deutsche Telekom, France Telecom
, Telecom Italia Telefonica, Dutch
provider KPN and Belgium's Belgacom attended
the meeting with Almunia.
"They discussed competition in the sector in general, in
particular the issue of consolidation and how the Commission
examines mergers in the sector under the EU merger regulation,"
said Antoine Colombani, Almunia's spokesman.
Almunia "also expressed the view that it would be desirable
to achieve a genuine single market in the sector, as currently
these companies operate their various subsidiaries on a national
basis", Colombani said in an email reply to Reuters questions.
Operators have been asking the European Commission to allow
more national and cross-border consolidation. But Almunia,
citing competition concerns, said in December he wanted to
explore "network-sharing" rather than allowing more mergers, to
make the market more efficient.
Colombani stressed that any network-sharing plans or pooling
of resources would have to be an industry initiative, and would
be subject to competition scrutiny.
In addition to consolidation, operators at the November
meeting with Almunia also discussed a proposal to regulate fees
paid by small telecom firms to rent network space from their
bigger rivals, two sources with knowledge of the meeting said.
Network sharing typically refers to mobile networks. Such
deals have become more common in Europe's telecom sector in
recent years as groups seek to cut costs.
Vodafone and Telefonica's O2 announced in June that they
would share a network in Britain to improve coverage and speed
up the roll-out of a new superfast mobile service known as 4G.
Such deals can include sharing antennas, telecom towers, base
stations and the actual network infrastructure.
The STOXX Europe 600 telecoms index was up 1.8
percent on Thursday after the FT report, making it the top
sectoral gainer. Deutsche Telekom, France Telecom and Telecom
Italia were 2.6 to 5.5 percent higher.
"What the share prices reflect now is a chance that these
companies could reduce their costs by building a single network
across Europe. However, the chances of that happening are in my
view very, very low," John Karidis, analyst at Oriel Securities,
Andrea de Vita, an analyst at Italian investment bank Banca
Akros, said sharing fixed line networks would be technically
difficult, but that other forms of sharing - like jointly buying
equipment - could help companies to make savings.
Within the Commission, telecoms chief Neelie Kroes has
touted more consolidation to address the lack of investment in
high-speed fibre networks, as it could create a handful of
strong cross-border telecom leaders that could make those
"Having a few pan-European operators that are strong in the
cross-border market would not necessarily be bad for
competition," Kroes said last year.
Analysts say a pan-European network is still a long way off
and that investors should focus on local markets. "We are
doubtful this will happen or that it would solve problems,"
Morgan Stanley said in a note on Wednesday.
Telecoms operators have been applying for more mergers to
expand their services, but some complain that regulatory
approval can come with unattractive conditions.
Almunia gave conditional approval to the acquisition of
France Telecom's Orange Austria operation by Hong Kong's
Hutchison Whampoa Ltd
Terms for approval included Hutchison having to sell radio
spectrum and give smaller competitors access to its wholesale
network. The deal was seen by some operators as a disappointing
test case for more consolidation.