Spectrum shenanigans could slow the pace of consolidation in Europe

A similar kind of reasoning is now being applied to Telefonica’s proposed takeover of E-Plus in Germany. Many argue that if Brussels allows the transaction to go ahead, other M&As will soon follow in other European countries as a wave of consolidation takes hold.

The UK went from five to four operators a few years ago, and could go from four to three; Austria has already gone from four to three; Ireland is attempting to go from four to three; France could go from four to three; and Spain could go from four to three. And that’s just for starters.

Continuing downward pressure on telecoms revenues makes this a plausible scenario. French minister Arnaud Montebourg spoke earlier this year of “Lilliputian” telcos that needed to team up to avoid being “colonised” by US giants.

But in many cases, spectrum issues could pull these markets in a different direction. The German regulator, for example, plans to reclaim 900 and 1800 MHz spectrum from a combined Telefonica/E-Plus and put it to auction. If a new entrant acquires it, then the market will have gone from four operators to three and back to four again.

If this does happen (and it’s a big if – many argue it will be extremely difficult for a new player to break into Germany) and is repeated elsewhere in Europe, then consolidation, by making new spectrum available, may paradoxically open the way for new competitors.

And what if some operators are unhappy with the spectrum landscape that emerges in the wake of a big deal in their market? Might they be able to block a spectrum reshuffle “imposed” by the regulator if they think it unfair? That could also slow the pace of consolidation.

All those dominoes may not be lined up to fall quite as smoothly as some expect.