A man  talks on a mobile phone in Cologne, Germany.
PHOTO: Getty Images
A man talks on a mobile phone in Cologne, Germany.

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Europe's top telecoms executives are discussing the creation of a pan-European infrastructure network

Discussions include Deutsche Telekom, France Telecom, Telecom Italia and Telefonica

(Financial Times) —  

Europe’s top telecoms executives are discussing the creation of a pan-European infrastructure network to unite the continent’s fragmented national markets, following prompting from Brussels to consider more radical options.

The idea of pooling telecoms infrastructure emerged at a private meeting between Joaquín Almunia, the EU’s competition chief, and bosses of Europe’s biggest groups, including Deutsche Telekom, France Telecom, Telecom Italia and Telefonica.

According to several people familiar with the discussions, the industry attendees left the meeting intent on exploring the idea, given their frustrations that Europe’s disjointed market has impeded their ability to compete. The executives’ companies, which dominate the EU market through their various national subsidiaries, have been caught out by the continent’s wider financial difficulties and face new challenges from rival global technology groups that use their networks.

“The operators expressed a deep sense of frustration and agreed to bring constructive ideas of how a European market could work,” said one person familiar with the meeting. “Objections won’t come from Europe, they will be from the [EU’s 27 national] regulators.”

Establishing an EU-wide network-sharing agreement would be fraught with financial and technological obstacles, given the myriad differences in infrastructure and national rules. But it would bring the European market more in-line with the US and China markets, each of which has only three or four large groups. It could also yield consumer benefits, such as single pricing for telecoms and internet services across Europe.

Mr Almunia has taken a tough stance against national mergers that reduce competition. But he has indicated more openness to cross-border tie-ups that would help build a single EU market, generate cross-border services and drive digital investment.

In December, Mr Almunia said there could be “other ways than mergers to promote efficiency gains among operators, such as network-sharing agreements”. A private briefing document for Mr Almunia on telecoms industry consolidation, seen by the FT, notes that the commission has never assessed a mobile telecoms merger that created a unified, cross-border network.

In spite of the hurdles, senior industry insiders say it is highly significant that discussion has begun between in the telecoms industry, which is balancing a long-term decline in revenues at a critical moment for new investment in next-generation mobile and fibre line access.

One idea floated since the meeting is the creation of a “newco” structure to pool companies’ network infrastructures, along with the debt associated with these assets.

The new vehicle could be used on a wholesale basis by all telecoms groups, with potential financial incentives in place to compensate those that contribute their network. It would also have better access to funds, both public and private, to build out next-generation fibre networks.