U.K. Minister Adds to Post-Brexit Telecom Merger Speculation

(Bloomberg) -- The U.K. may take a softer stance than the European Union on telecom and media consolidation in the future, meaning Brexit may be an opportunity for the sector to pursue deals that would have faced opposition from regulators in the bloc.

“There is a case, potentially, for future mergers,” Margot James, minister for the creative industries, said in an interview with Bloomberg TV’s Annmarie Hordern on Tuesday. “But that really is a decision for companies and Ofcom to take, under the direction of the CMA,” she added, referring to Britain’s communications regulator and the Competition and Markets Authority.

Executives and bankers are looking for hints the U.K. will be more favorable to tie-ups after the European Commission blocked Telefonica SA’s planned 10.3 billion-pound ($13.4 billion) sale of its U.K. mobile unit O2 to CK Hutchison Holdings Ltd. two years ago.

At the time, Ofcom and the CMA supported that decision, a ruling that shut the door on similar deals across the region. In the mergers that have been approved, notably in Italy, operators had to offload some of their prized spectrum to new competitors to preserve competition.

A government paper in July suggested Ofcom should consider allowing more deals if investment in next-generation 5G networks wasn’t supported because of fierce competition. Speculation about purchases elsewhere in media has ensued following Comcast Corp.’s acquisition of the U.K.’s largest pay-TV broadcaster, Sky Plc.

Europe’s companies lag U.S. and Asian peers because of the region’s aversion to wireless and broadband mergers, industry chiefs from Nokia Oyj and Proximus SADP said at an industry conference in Brussels last week.

BT Working Well

BT Group Plc’s legal separation from its broadband wholesaling division, Openreach, is working well, James also said. That move aimed to prevent Openreach from favoring its parent company’s retail arm over the competing broadband companies that rent the network.

“We’re very pleased at the moment with the separation that has already occurred,” James said. “Openreach are now an independent company operating with its own board under the dynamic leadership of Clive Selley, and that separation is working well.”

The praise may come as a relief for the former monopoly, which recently completed the transfer of 31,000 employees to Openreach. Ongoing tension with regulators on this point and others formed part of the discontent that led to BT’s board to oust Chief Executive Officer Gavin Patterson in June. The company is expected to select his replacement in the coming days.

“That is not to say that we are not delighted that there is more competition in this market now,” James added, praising fiber-optic cable builder CityFibre Infrastructure Holdings Plc, which was bought by a Goldman Sachs-led consortium in April.

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