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Why are European telecom firms selling assets?

Vodafone’s bid on Tuesday to sell its Spanish business is the latest move by European telecom firms trying to strengthen their financial health by divesting assets, consolidating markets and selling stakes to investors.

Buried under billions of euros of debt, European telecom companies operate in small, highly competitive markets, unlike their peers in other regions, making it difficult for them to find growth.

What options do the telecom firms have to expand?

European telcos have been trying to break a deadlock on mergers for years in the face of opposition from regulators.

In Europe, many countries have four telecom operators jostling for share in small markets, which usually equates to lower prices for consumers but less profit for the companies, analysts say.

Mergers would reduce the number of operators, and regulators are concerned that could lead to higher prices, less choice and a reduction in quality for consumers, particularly if two local players join forces in one market.

Spanish telecom companies Orange and MasMovil announced a $19 billion merger last year, set to be a test case for whether Europe’s antitrust regulators have become more lenient in approving deals that reduce the number of mobile operators.

The EU competition enforcer in June reiterated its worries about such a merger, indicating the telecoms operators may need to offer significant remedies to get the deal approved. Reuters

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