Outlook: Why merge these telecoms monsters?

Click to follow
The Independent Online
WE'RE ALL for the spirit of European integration at The Independent, but for Deutsche Telekom to merge with Telecom Italia is surely taking the process too far. The Italian government, which retains a golden share in Telecom Italia, would be crazy to allow it to take place.

Both these companies maintain an iron grip on their own domestic markets; when it comes to monopoly, they make our own British Telecom seem like an also-ran. Deutsche even has a cable network stretching to some 20 million households on top of its ordinary telephone monopoly. By any standards, this would be a monstrously anti-competitive alliance.

From a shareholder value perspective too, it is hard to see how this deal can benefit either party. Both of them are hopelessly inefficient, fat and lazy by world class benchmarks in this industry. Despite its publicly listed status, Telecom Italia is still essentially a branch of government bureaucracy and Deutsche Telekom isn't much better.

Jumping into bed together is hardly going to help address these deeply rooted business inefficiencies, indeed it might even reinforce them. Much better placed to modernise Telecom Italia would be our own British Telecom. With 10 years more experience of liberalised telecoms markets under its belt than its European peers, BT has already managed to transform itself from government monopoly into efficiently run business.

Yet even BT has balked at the idea of taking on Telecom Italia. If BT thinks it would have problems, what chance Deutsche?

In the end, this mooted merger may founder on Italian pride. The Italian Government says it would contemplate only an equal partnership, but is it really possible to forge a merger of equals when one company is so much bigger than the other? Shareholders and customers of both companies ought to pray that

Comments