With profitability elusive in the industy many of the world’s leading telcos are looking to the M&A market for inspiration. Unfortunately, EU rules on competition are inhibiting the prospect of innovation.
According to Darrell Jordan-Smith, Red Hat’s VP of Worldwide Sales, the European Commission’s (hereafter known as the Gaggle of Red-tapers) approach to market consolidation is actually preventing investment and innovation at some telcos within the region. For many the road to digital transformation will be a bumpy one, with little assistance from the tedious and cumbersome bureaucrats.
Buying-in talent, or exiting a market to prioritise funds is not uncommon, and with the challenges being faced by telcos in the new digital community, such deals are likely to become more common. Not in Europe if the Gaggle of Red-tapers has anything to do with it.
As it stands, the Gaggle of Red-tapers will not stand in the way of market consolidation, assuming it doesn’t deem the transaction would be at the expense of the consumer. Ensuring there is enough competition in the markets to create benefits for the consumer is a top priority, and this usually means the Gaggle of Red-tapers want at least four operators in any region.
“Many of the telcos who have smaller customer bases are lacking funds to innovate simply because they are fighting fierce competition in the market,” said Jordan-Smith. “In some cases market consolidation is need to ensure the telcos have big enough customer bases to do some interesting this. In other examples, there are certain markets which aren’t really big enough to justify four operators. In both examples, and many others, Europe is only inhibiting innovation and it needs to change.”
In other regions around the world this is not the case. In the Asian markets or North America, telcos have much more opportunity to engage in market transactions, while also dedicating more funds to innovation. This is working, and the European telcos have to be careful they are not left behind.