European operators used Q3 earnings to stress the need for regulatory reform and in-market consolidation. Regulators were urged to adopt pro-investment, pro-consolidation frameworks to boost competitiveness.
Orange: Potential consolidation in France dominated discussions as the CMA’s approach to the Three/Vodafone merger in the UK was praised
Amidst a relatively flat period of revenue growth for the European telecoms sector, Orange’s Q3 results showed some small gains, mostly led by strong results in Africa and the Middle East. However, Orange’s joint bid with Bouygues Telecom and Iliad for a large part of Altice Group’s activities in France (including most of SFR’s assets) was by far the most significant talking point, despite Christel Heydemann’s (CEO, Orange) reluctance to give away any new details on the potential deal. Throughout a series of similar questions on the deal from analysts, Heydemann was adamant that although there were positive talks ongoing between the parties, an agreement and regulatory approvals are not yet a certainty. She emphasised Orange’s willingness to move quickly to negotiate a deal and expressed her confidence that consolidation would benefit the French market, arguing that the increased market share for Bouygues and Iliad-owned Free would enable them to better compete with Orange. Heydemann was clear that the need for regulatory approvals from both French and EU authorities could slow and potentially stop the deal from going through. The Competition and Markets Authority’s (CMA) decision to approve the Three/Vodafone merger in the UK was a consistent reference point, with Heydemann keen for French and European regulators to consider a similar approach. Analysts also posed questions about the future of MasOrange in Spain, particularly on whether a portion of the operator would be sold to private equity investors in the near future. Both Heydemann and Laurent Martinez (CFO, Orange) explained that there was no rush in pushing for this kind of deal in Spain, especially considering the merged entity’s lock-in period until April 2026. Martinez was optimistic about the potential for future deals though, praising MasOrange’s clear ambitions for helping to create the ongoing speculation about the operator.
Liberty Global: Opco spin-offs remain a key objective as it positions itself for future altnet acquisitions in the UK
After reflecting on the departure of John Malone as Liberty Global Chairman, Mike Fries (CEO, Liberty Global) began the Q3 earnings call by underlining the operator’s ambitions to lower leverage and unlock shareholder value, in particular through the separation of one or more of its operating businesses. One subsequent analyst question centred on the Sunrise spin-off in Switzerland completed in November 2024 and the progress of similar moves elsewhere, to which Fries stated that he wanted to transition to a Sunrise-esque framework wherever Liberty Global operates, including in the UK, with Belgium and Netherlands (referred to as “rational, three-player markets”) the closest to execution at this stage. Many analysts’ questions, however, focused on the outlook for competition and consolidation in the UK fibre market. On the former, Lutz Schüler (CEO, Virgin Media O2) identified competitive pricing from altnets at the retail level and from Openreach in the wholesale market, but was upbeat about experiencing just a 1% ARPU reduction in such a tough commercial environment. With respect to M&A, Fries reiterated his view that the market requires rationalisation, stating “most altnets cannot keep doing what they are doing”. He added that Liberty Global remains keen to pursue consolidation opportunities, pointing to nexfibre’s acquisition of Upp in September 2023 as a model that could be replicated. Fries welcomed the UK Government’s growth mission and recent changes in leadership at the Competition and Markets Authority (CMA), which may signal greater support for industry consolidation. While certain pain points (e.g. “broadband taxes”) still persist, he considered that operators were experiencing more of a tailwind nowadays than not, putting him in a more confident mood than he has been in a long time. Fries also highlighted the joint letter sent to Ursula von der Leyen (President, EC) by over 20 telecoms CEOs as they seek to position the sector – ahead of the draft Digital Networks Act (DNA) – as vital to Europe’s growth and productivity, and to suggest that maybe it’s time for regulators to “get off our throats”.
Telefónica: Consolidation will be a complement to the new five-year strategy, only pursued if specific conditions are met
Emilio Gayo (COO, Telefónica) presented a mixed set of results for Telefónica in Q3, highlighting growth in Spain and Brazil, as well as challenging market dynamics in Germany (due to the migration of 1&1 from the network) and in the UK. The subsequent Capital Markets Day saw the unveiling of a new five-year strategic plan, which Marc Murtra (COO, Telefónica) described as a chance to redefine Telefónica’s purpose and to shape the future of the company and the industry at large. His metaphor-heavy remarks focused on the need to leverage the operator’s internal assets and knowledge, while embracing external challenges, such as geopolitical polarisation. Murtra was characteristically critical of the stagnant, fragmented nature of European telecoms and lamented the lack of domestic technology titans to rival those born to the US or China. He was hopeful, however, that the broad acceptance of recommendations stemming from the Draghi and Letta reports could lead to a modernised regulatory framework and greater support for in-market consolidation, which could drive scale and synergies. Murtra stated that consolidation would lead to more efficient investment, with the status quo resulting in sub-scale operators and the underdevelopment of networks, especially standalone 5G. Nevertheless, while his vision is for Telefónica to be a “world-class European telecoms operator with profitable scale”, in-market consolidation is not a core, organic pillar of the plan, but instead a longer term “upside” (i.e. complement), on which the operator would seek to execute effectively should value-accretive opportunities arise. Responding to analysts, Murtra was clear that any potential deal would have to meet price-, synergy- and remedy-related conditions, and did not rule out pulling debt or equity levers to raise capital. As things stand though, Telefónica is not seeking to establish a “war chest” to fund large-scale M&A activity in the future.
BT Group: A warning to the Government and regulator on the need for regulatory certainty if the fibre build is to be completed
BT used its H1 FY26 results to signal a stabilised performance of its business unit and a return to growth for its consumer division, where a pivot back to a multibrand strategy seems to be paying off. Alison Kirkby (CEO, BT Group) talked up Openreach as “the UK”s only digital backbone” and as the only operator building fibre at scale with nationwide reach. Much of the Q&A focused on the economics of the fibre market and crucially the regulatory environment the group is looking for from Ofcom to complete the job on rollout. Kirkby stressed that the operator has a very constructive and open dialogue with government, which sees the value of broadband investment for the country – and one that can be considered a rare infrastructure success story. However, given a pending budget in two weeks’ time, it was stressed that any unwelcome decisions on tax could impact the target for reaching 30m premises by 2030. While that lever sits with the Government, Ofcom is also still to finalise its Telecoms Access Review (TAR). Here, Kirkby set out what was needed from a competition and investment point of view, urging Ofcom to maintain a predictable regulatory framework for the second half of this decade. “Until the words are written on the page” (and a commitment is made to further subsidise the hardest to reach homes), BT won’t put a written commitment to the next 5m premises. Where altnets fail, BT once again stressed the preference to build rather than buy, and that at current valuations, it hasn’t seen anything that is economically sensible to even consider acquiring.
Vodafone Group: With right-sizing complete, efforts are focused on building on existing momentum in Germany and the UK
Referencing plans she laid out in May 2023 to reshape the group’s holdings, Margherita Della Valle (CEO, Vodafone Group) opened the H1 FY26 results by stating that effort is largely complete following the Vodafone/Three merger in the UK and the acquisition of Telekom Romania’s assets from Deutsche Telekom. A broadly optimistic assessment of the firm’s performance to date was offered, citing better than expected performance of VodafoneThree in the UK and signs of “turning a corner” in Germany, which is the firm’s single largest market. In the UK, Della Valle noted that the operator’s £11bn investment commitment, a condition of the merger approved by the CMA, would accelerate trends in already improving customer experience in coverage and speed according to third-party reporting. In Germany, Della Valle cited reduced churn as a sign of long-term movement towards stronger performance and assured that the addition of MVNO 1&1’s customer base to the network will make up for, if not exceed, the loss of Lyca Mobile customers to O2. She also pointed to a return to growth in service revenue (0.5%) as a tailwind, the first such growth since the implementation of a law that ended bulk TV contracts in multi-dwelling units (MDUs) in July 2024 and saw the operator lose millions of subscribers residing in MDUs. When asked about the potential for reform of the Telecommunications Act (TKG), she was generally positive on the direction of debate towards accelerating network rollout through permitting simplification and applauded the German Federal Ministry for Digital and State Modernisation’s (BMDS) recent consultation on copper retirement as progress. Regarding potential reform on in-building wiring to support fibre rollouts in MDUs, Della Valle described the debate as “unnecessary”, arguing that bottlenecks lay in construction capacity limits, not with housing associations and noting that should draft legislation should be developed with such reforms included, it would only have marginal impact on fibre building.
Deutsche Telekom: The German Government should intervene to prevent landlord fees from stopping fibre builds to MDUs
Record-setting growth by T-Mobile in the US balanced out an even weaker than usual quarter in Germany for Deutsche Telekom. Characterising the growth exhibited in the firm’s Q3 results as “consistent and reliable”, Tim Höttges (CEO, Deutsche Telekom) highlighted T-Mobile’s acquisitions of UScellular and Metronet as drivers of a record quarter for the US operator. At home, however, improving fibre penetration offered one of the only bright spots in the operator’s results, alongside the firm’s highly touted deal with Nvidia to bring 10,000 GPUs to Munich to launch the highest capacity data centre in Europe at the beginning of next year. Höttges discussed how Deutsche Telekom was revisiting its fibre deployment strategy in Germany, seeking to defend its position in rural communities and prevent altnets from “eating our cake” while “going on offence” in accelerating connections in MDUs. Speaking as Della Valle (Vodafone Group) did to the potential for regulatory reform on MDU access, he argued that forcing fibre builders to pay revenue sharing or installation fees to landlords is disincentivising investment and will harm continued digitisation without intervention. When asked about the role of Elon Musk’s Starlink in both fixed and mobile markets, Höttges was slightly more bullish on the potential of direct-to-device (D2D) satellite to fill not spots in the US but roundly critical of the idea European homes could be served better by non-terrestrial networks. In addition to listing off the technical limitations of satellite – including capacity, latency and line of sight interruptions – he also cautioned the much greater scarcity of spectrum in Europe that would limit service expansion. The firm expects a potential auction of spectrum no sooner than the end of 2027 in the US, as the FCC was instructed to make a volume of spectrum available for auction within the recently passed ‘One Big Beautiful Bill Act’.
