December 3, 2021

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Spanish telecoms companies call for consolidation after massive drop in income |  comp

Spanish telecoms companies call for consolidation after massive drop in income | comp

In recent days, the heads of large telecoms companies operating in the Spanish market have called for the launch of a new consolidation process. Their claims come after the third quarter, in which income from operator services declined unadjusted.

The last director to speak was Telefónica’s CEO, Angel Villa, who confirmed yesterday that the situation of the sector in Spain is unsustainable as a result of strong competition. At the traditional Morgan Stanley Telecom, Media and Technology (TMT) conference, the CEO said the merger must take place to resolve an unsustainable situation for some operators. According to the director, Telefónica, given its size, cannot be the protagonist of this process, but it can act as a facilitator, supporting standardization.

Along these lines, the European Commissioner for Competition, Margrethe Vestager, indicated at the aforementioned conference that the Commission is reviewing competition policy to support digital and environmental transformation. That review focuses on three levels, mergers and acquisitions, competition, and state assistance. The terms of the review are being negotiated, with the intention of a European Parliament vote in December. According to Barclays, this does not mean competition authorities will relax the rules that have prevented various mergers, although the bank believes that the European Commission is in a “listening mode”, ready for change. These analysts believe there is potential for changes in the sector with future deals. “It creates positive choices for the sector’s future,” he says.

At the same conference, the Orange Group’s chief financial officer, Ramon Fernandez, said that the operator would consider an alternative merger or acquisition in Spain that would affect the company. The CEO emphasized that Orange is actively reflecting on the Spanish market and its structure.

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In turn, Nick Read, CEO of Vodafone, said on Tuesday that further consolidation is still necessary in the Spanish market to improve the return on capital (Roce) for the sector. In addition, he called for increased network sharing agreements, expanded use of assets and returns.

Wary of the current fragmentation in the sector, the CEO explained that the company is actively seeking new opportunities within the market structure, including strategic alliances in networks and mergers.

In this scenario, the CEO of MásMóvil, Meinrad Spenger, intervened, who confirmed on Wednesday that the situation in the sector is tragic because revenues continue to decline, while telecommunications must face huge investments in infrastructure. The manager emphasized that in Spain there are more than 40 brands and 25 related operators, and added that the merger is a formula for improving margins. However, the CEO urged his rivals to move on, noting that MásMóvil had already closed the acquisition of Euskaltel this year, and that deal involved the merger of the fourth and fifth national operator.

In any case, the renewed wave of statements about the hypothetical consolidation process coincided with a new decline in income from large telecom services in the third quarter, as a result of intense competition and the drift of the market into the future. low cost. The Big Three are under pressure from groups such as MásMóvil, Digi, Finetwork or Avatel.

Enter

Vodafone cut its services revenue 0.6% in the first fiscal quarter and 2% in the second quarter. Only mobile phone sales prevented a decline in turnover. EBITDA decreased 0.6% organic and 8.8% reported. Along the same lines, Telefónica España cut retail revenue by 2.7% between July and September, with profitability declining by 8.9%. For its part, Orange saw its retail services revenue decline 7.9%.

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The market appeared bets on potential operations. Analysts at Bloomberg Intelligence have indicated that a merger between MásMóvil and Vodafone appears to be the most likely consolidation, as it will face less harsh regulatory conditions than Brussels. On the contrary, they believe that the consortium of Vodafone and Orange in Spain will face very harsh treatments that could spoil the deal. Similarly, they refer to the option of an agreement between Vodafone and Orange in the field of networking.