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Telefónica is ready to invest in data centres and cybersecurity services to convince European regulators to approve the telecommunications merger as the Spanish company aims to lead the continental integration.
The Madrid-based group hopes that the pledge to make certain investments in key digital infrastructure will convince the Commission that fewer larger carriers can increase the bloc’s technical resilience, according to those familiar with the issue.
Telefónica Chairman Marc Murtra has made European integration his number one priority since it was parachute into business this year by shareholders, including the Spanish government.
The company operates in Spain, Germany and owns 50% of UK operator Virgin Media O2, and is one of several European communications groups that will allow Brussels to cut its four player market to three operators.
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The merger has recently been permitted in the UK, with regulators approved a £16.5 billion merger between the three and Vodafone in December.
Telefónica is in the early stages of thinking about a move to win 50% of its Virgin Media O2, which it doesn’t yet own from shareholder Liberty Global, according to three people familiar with the issue. The business was previously valued at £31.4 billion. Telefónica declined to comment on the plan.
The EU is working on ways to arrest relative economic decline, offering opportunities for businesses to promote more generous competitive regulations.
Maltra said in March that if Brussels does not seek change, Europe’s position in the world will “continue to decline.”
In his report on European competitiveness last year, Mario Draghi recommended that blocks create stronger players with greater incentives to promote communication integration and invest in improving connectivity.
The former European Central Bank president wants Brussels to define the telecom market at the European level, rather than at the member state level as it is now.
According to Trade Body Connect Europe, there are 41 carriers in Europe with over 500,000 customers. In contrast, there are only five mobile operators in the US, while four in China and Japan each.
The Trump administration’s hostility towards Europe has pushed the issue of cybersecurity onto the agenda. On Tuesday, the head of the bloc’s cyber agency warned that the EU is dependent on the US for cybersecurity and must “step up” to help businesses tackle cyber threats.
Those familiar with Telefónica’s ideas said the company is ready to invest in cybersecurity services to provide local alternatives to Israeli providers who dominate the industry to European companies.
EU cybersecurity agency ENISA warns that there is an increase in state-sponsored cyberattacks, backed by China and Russia.
Telefónica, which currently operates 15 data centers, is considering new investments along with a strategic review that is expected to close in the fall.
Additional Reports by Barbara Mones and Laura Dubois of Brussels
