ING – Telecoms Outlook, 2024

The European telecom industry is expected to see consolidation in the coming years, with large telecom companies driving the trend. Potential mergers and acquisitions (M&A) in two countries are likely to occur, and further consolidation may follow if these transactions are approved. In addition to these larger deals, smaller deals such as asset sales are also expected. Entrepreneurial shareholders are pushing for operational improvements in telecom companies like Vodafone and Altice International. Other entrepreneurs, such as Digi's Zoltán Teszári, are likely to expand their presence in the industry. Companies may also consider adjusting their ownership share of strategic assets. Liberty Global, led by Chairman John Malone, may explore its options in this regard. In Italy, Iliad has made a proposal to acquire Vodafone Italia, although the offer has been rejected. However, progress is expected in other countries, with proposed M&A transactions in Spain and the UK likely to be approved, subject to conditions. Consolidation is seen as necessary in Denmark, Spain, the UK, and Italy. Aside from corporate M&A, demand for infrastructure assets is expected to remain high, and ownership of tower portfolios may change hands. Consolidation among mobile tower companies may occur in the future. Tower companies are currently focused on improving the financial metrics of their existing portfolios. Government intervention in strategic assets has been observed, particularly in Spain and Italy. Economies of scale are considered valuable in markets with intense competition, making industry consolidation relevant. However, the financial environment has changed, with higher interest rates and a decline in risk-seeking behavior. Obtaining regulatory clearance for mergers is challenging due to competition legislation, and remedies such as spectrum sales or the creation of a new operator may be required. Smaller operators face difficulties in deploying leading fixed and mobile networks due to limited cash flows. M&A can help these operators gain scale and invest in competitive networks. This remains a strong argument for allowing consolidation in the industry.