European telecoms: hold the line please

European telecommunications companies that operate in countries with four or more competitors have generally had poor profitability. That does not concern regulators, although the resulting low rate of investment should. But regulators are slowly changing their tune on consolidation, for example allowing Telefonica’s purchase of E-Plus in Germany in July. That is good news for a sector whose shares have underperformed the market over the past decade. Both incumbents and challengers have struggled with the current structure. In particular the mobile operators have taken a hit. In the US, the decline has been less dramatic. And while US telecom investment has boomed since 2008, in the EU it has hardly changed. More consolidation could change that. Yet, even if the EU softens its stance further, the process will take time.