Telefonica warned that the current fragmentation of the European telecommunications market due to EU “barriers” to mergers “could have serious consequences not only for the sector, but also for the competitiveness of the European economy”, for which it urges Brussels to “update its competition policy”. This is highlighted by Nuria Talayero and Dácil Jiménez, public policy officers of Telefónica, in an article published on the company’s blog and entitled “Efficient market structures in the telecommunications sector”.
The directives guarantee, according to Servimedia, that the telecommunications industry is one of the strategic sectors in Europe and the main technological activity of the continent, with an added value of 141.5 billion euros per yearbut “it has a market structure problem which weakens its investment capacity and jeopardizes the achievement of the EU’s digital and green objectives”.
“The telecommunications sector is very fragmented in Europe at the national level”
“The telecommunications sector is very fragmented in Europe at the national level. The current approach to European competition regulation and policy continues to promote artificial competition through an increase in the number of operators and preferential asymmetrical treatment for new entrants,” the Telefónica guidelines point out.
According to him, market fragmentation has become a “endemic problem” by the “European rejection of ‘in-market’ concentration or the application of strict remedies as a condition of mergers, to preserve short-term prices or the number of network operators”.
Telefónica complains that the approach adopted to introduce competition during the process of liberalization of the sector in the 1990s has hardly changed. It’s an “outdated approach”point out Talayero and Jiménez, “after 25 years of market liberalization, which gives rise to unsustainable market structures in the telecommunications sector”.
“Serious Consequences”
The consequences of this scenario are, according to him, that the value of the European telecommunications sector has been gradually reduced, due to the decline in income and return on investment, weakening its competitive capacity and jeopardizing the sustainability of future investments. , unlike other regions such as the United States.
This is worrying, they say, because this situation translates into a reduction in the competitiveness and investment capacity of a strategic partner for Europe, such as the telecommunications sector.
For public policy makers at Telefónica, “Investors have long blamed the European sector’s deflationary earnings outlook, and its weak returns, on an artificially competitive and fragmented landscape.which lacks scale in the market compared to its American counterparts.
“This could have serious consequences not only for the sector, but also for the competitiveness of the European economy. Investments could be, and are already being, redirected to other sectors or to geographical areas where the telecommunications sector is more profitable. Undervalued European carriers could also increase their vulnerability to takeovers by third-country players.”
They recall that Deutsche Telekom, one of the main European operators, sold its Dutch subsidiary at the end of last year in favor of its American subsidiary T-Mobile, reinforcing the transatlantic orientation of the German group, while Telecom Italia secured a buyout offer from US fund KKR.
“The destruction of value endangers the investment capacity of the sector and is dramatic for Europe”
“The destruction of value endangers the investment capacity of the sector and is dramatic for Europe. It assumes a decrease in consumer welfare and a high risk of technological decapitalizationloss of competitiveness, strategic autonomy and digital sovereignty”.
Thus, he considers that “Europe must find a new path of growth and sustainable progress and take political measures to improve the investment climate in the telecommunications sector”.
“More concentrated telecommunications markets in Member States would better serve the consumer by promoting sustainable competition and efficient investment in better quality infrastructure, facilitating an adequate return on investment,” adds the article collected by Servimedia.
“Competition policy needs to be updated and focus on reducing barriers to consolidation in member states, as other regions are doing; stop promoting artificial competition, as well as focus on long-term investment sustainability and non-quantitative factors rather than short-term price and market share.