February 6, 2012 / 3:01 PM / 8 years ago

TEXT-Fitch on Vodafone deal termination

 (The following statement was released by the rating agency)	
The announcement by Vodafone on 6 February that it had terminated merger
talks with Wind Hellas in Greece suggests operators will struggle to get
regulatory approval for further consolidation in some European markets,
potentially harming future growth and investment prospects. While Vodafone gave
no reason for the decision, reports have indicated antitrust regulators opposed
the deal.	
Regulators, both local and in Brussels, are focused on a populist agenda of
mobile termination rate (MTR) and tariff reduction particularly at this
constrained time in the economic cycle. One additional weapon in their armoury
is to prevent further consolidation within markets to less than three or maybe
four network owners.	
It is possible that three network operators and a number of service providers in
a small mature country like Greece are too many. Headline revenues for Greek
operators, already pressured by MTR cuts and roaming tariff ceilings, are also
being hurt by intense competition, so that all operators are struggling to
return positive growth.	
Mirror the Greek situation across a number of other European countries and the
operational case for consolidation within markets is clear. Network owners need
revenue and cash flow growth to encourage new network investment, particularly
in improving mobile data speed. As Fitch has pointed out previously, this
investment will be delayed as long as European mobile revenue growth stagnates.	
The Greek decision implies that the European mobile network landscape is likely
to continue with its patchwork quilt of three to four network owners per country
with no opportunities for any operator to significantly build market share. The
resultant decline in revenue growth prospects is negative for ratings across the
sector and will hamper progress on 4G investment as Europe falls further behind
the US and Asia on mobile data speeds.	
Michael Dunning	
Managing Director	
+44 20 3530 1178	
Fitch Ratings Ltd	
30 North Colonnade	
London, E14 5GN	
Richard Petit	
Associate Director	
+44 20 3530 1385	
The above article originally appeared as a post on the Fitch Wire credit market
commentary page. The original article can be accessed at www.fitchratings.com.
All opinions expressed are those of Fitch Ratings.	
 (New York Ratings Team)	
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