Deutsche Telekom chief calls for European consolidation

René Obermann, the chief executive of Deutsche Telekom, Europe's largest telecoms company, has called for consolidation of European mobile phone networks either through mergers or network-sharing arrangements as the industry looks to cope with price deflation.

Mr Obermann, speaking in London, said there were around 30 network owners in the mobile phone sector across Europe operating 70 networks, including 2G, 3G and some wireless broadband networks. In many countries, network owners can only use mobile networks for specific technologies as stipulated in licence agreements with national regulators. Mr Obermann called on regulators to relax licence obligations to provide network owners with an incentive to invest in telecoms infrastructure.

"Regulators should accept there is a need for more efficient use of capital resources for both economic and ecological reasons," he said, referring to the environmental impact of building duplicate networks across a region. "Regulators should allow network consolidation. Over time that would be useful," he said, adding that a move to allow a more efficient use of spectrum - the frequencies that carry mobile phone signals - would not reduce competition for consumers.

Over the past few years, the European mobile phone market has been characterised by rampant competition, significant price deflation and regulatory intervention around areas such as roaming rates. In countries like the UK, Italy and the Netherlands, mobile penetration rates have breached the 100 per cent mark and companies such as Vodafone have turned their attention to the emerging markets of India and Africa to tap into growth.

In Europe, mobile operators such as T-Mobile have pushed new services like mobile broadband access and mobile music to offset lower voice prices. Mr Obermann said operators would also increasingly look to strike up deals to share network infrastructure or pursue in-market consolidation if regulators allow such activity. In the UK, Vodafone and Orange are considering a plan to share 3G masts to reduce costs and avoid duplication, while in Germany, T-Mobile - Deutsche Telekom's mobile arm - shares infrastructure with O2. T-Mobile has recently struck a deal to buy Orange's network in the Netherlands, and has also conducted in-market consolidation in Austria. Mr Obermann said he was confident the mindset of regulators toward in-market consolidation was beginning to change.

In the UK, the 3G-only network 3 has been considered ripe for consolidation after plans to list the network operator were shelved. There are five network owners in the country but nine separate networks, factoring in both 2G and the more advanced 3G technologies. Mr Obermann said: "In the long run, I do believe mobile will be increasingly driven by scale... over time, you will see global consolidation."

The head of Deutsche Telekom refused to comment on speculation that the company is preparing to shed a further 2,000 jobs in its head office in Bonn, on top of the 32,000 job cuts it has already announced.