November 26, 2018 / 3:56 PM / 6 months ago

Telecoms stocks rally as reported OK to Dutch tie-up fuels M&A hopes

The German share price index, DAX board, is seen at the stock exchange in Frankfurt, Germany, March 21, 2018. REUTERS/Tilman Blasshofer

MILAN (Reuters) - Shares in European telecoms rallied across the board on Monday after a report saying the European Commission was set to clear a merger in the Netherlands fuelled fresh optimism about deal-making in the sector.

People familiar with the matter told Reuters that Deutsche Telekom (DTEGn.DE) is likely to win unconditional EU antitrust approval for its bid to buy Swedish peer Tele2’s (TEL2b.ST) Dutch unit.

The report sent shares in Tele2 rallying 9 percent, while Dutch market leader KPN (KPN.AS) surged more than 4 percent and the broader European telecoms index .SXKP shot up over 3 percent in afternoon trading.

“The Dutch telecom market will consolidate from four to three players with the approval of the Deutsche Telekom - Tele2 deal, reducing competition,” said Jauke de Jong, a research analyst at AFS Group in Amsterdam.

He said the deal also indicated that the European Commission could have a more favourable stance towards consolidation in other European countries such as France.

Several telecoms shares such as Vodafone (VOD.L), Telefonica (TEF.MC), Telecom Italia (TLIT.MI), Swisscom (SCMN.S) and BT (BT.L) and Orange (ORAN.PA) spiked higher on the report.

Telecoms have been underperforming over the past few years as pricing pressure, competition and costly network upgrades have been squeezing margins, keeping investors away.

Reporting by Danilo Masoni, editing by Julien Ponthus

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