Moody’s questions benefits of telecoms mergers

Moody’s, the rating agency, warned that the telecoms industry could see limited benefits from sector consolidation because of its need to address competition concerns.

Mergers in the telecoms sector may not reduce competitive pressures on margins and profits as much as companies have hoped. Moody analysts point to the stringent competition remedies required to win EU approval of a merger between two telecoms groups in Ireland. High quality global journalism requires investment. Moody’s found that the requirement for Hong Kong’s Hutchison Whampoa to sell part of its network capacity to mobile virtual network operators (MVNOs) meant that price competition was unlikely to ease after it acquired O2 Ireland. Instead, the analysts said that cable operator UPC, which is owned by Liberty Global, will be the main beneficiary as its agreement with Hutchison Whampoa will allow it to improve its product offerings and cross-sell mobile services to its customers.