The significant fragmentation of European companies, compared to their U.S. and Chinese counterparts, is hindering the investment capacity of European telecom operators in digital infrastructure and services.
Consolidation, particularly through a cross-border operations model, could enhance their competitiveness and market expansion, making them more profitable and sustainable over time, the report indicates.
Consultancy data shows that the average number of subscribers per European operator is just five million, compared to an average of 107 million in U.S. companies and 467 million in Chinese firms.
The average monthly revenue per user generated by fixed and mobile services in Europe is less than half of that in the U.S., and the capital expenditure (CAPEX) per capita is only 109 euros, compared to 174 euros in the U.S. market.
The study’s authors note that the European regulatory environment, which has traditionally limited mergers and acquisitions in the sector, is changing, with regulators now adopting a more flexible stance that favors consolidations.
“Influenced by the reports of Mario Draghi and Enrico Letta, they allow operations to proceed through ‘conciliatory solutions’ instead of direct blockages, aiming to accelerate these changes by 2028 instead of 2030,” they claim.
The Oliver Wyman study outlines five merger and acquisition scenarios designed to increase the scale of European operators, ranging from mega-mergers to portfolio adjustments.
In the first scenario, European markets with five or six firms move towards greater concentration, with three or four dominant players, favoring “scale and efficiency” and enhancing “investment capacity and profitability,” though facing lengthy regulatory processes that may require asset sales and infrastructure sharing.
In the second scenario, companies divest non-strategic assets to focus on areas with higher growth potential, and in the third, they export their business models and expertise to new markets.
The acquisition of digital services, particularly in the B2B segment through cloud solutions, IoT, cybersecurity, and other digital offerings is the focus of the fourth scenario.
The fifth and final scenario anticipates a reversal of the disinvestment in telecom infrastructure (‘carve-out’), such as towers and fiber, entering a new phase of consolidation among fiber companies and alternative network providers, as well as cross-border mergers among tower companies to form “regional or pan-European conglomerates.”
According to the Oliver Wyman report, national consolidation operations record “the highest average transaction value in the sector, reaching 2.1 billion euros,” while ‘carve-out’ and infrastructure consolidation deals have “an average value of 600 million euros.”
