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Tuesday, 30 May, 2000, 22:04 GMT 23:04 UK
Shifting Europe's mobile landscape
Mobile phone ownership is spreading through Europe
Mobile phone ownership is spreading through Europe
The mobile phone industry is fast consolidating in Europe, with a few giants emerging, forcing key players to decide whether they can afford to stay in the race.

For those who can, the rewards could be huge, as the mobile phone business converges with the internet as the new generation of mobile phones allows high-speed net access and a full video capability.

Deutsche Telekom needs to move fast
Deutsche Telekom needs to move fast
But the expense of developing these networks, and paying for the increasingly expensive licenses issued by governments, is also driving the consolidation, as few can afford the price of developing a pan-European network on their own.

Even Vodafone, the world's largest mobile phone operator, valued at nearly 200bn, was glad to receive enough from its sale of Orange to pay for the cost of future bids for new generation licences in France and Italy.

But with mobile phone use and ownership growing at a phenomenal rate across Europe, there will be few telecoms operators who will want to miss out on the bonanza.

Acquisition or growth?

Vodafone reached its number one spot by a clever series of acquisitions, leveraging its highly valued shares to buy mobile phone companies around the world.

A key decision was to move into the US market, buying the mobile phone business of one of the US regional telephone companies and then forging a national alliance with Bell Atlantic.

Its acquisition of Mannesmann gave it the largest wireless operator in Germany and and second largest in Italy, as well as Orange.

Now France Telecom, the sleepy state-owned company that seemed to be continually outsmarted by ally and then rival Deutsche Telekom, seems to have determined on the same route.

Its purchase of Orange, and determination to merge all its telecoms assets - including its 10 million French mobile customers - into one company, gives it a good chance of further acquisitions across Europe.

The new company will also be bidding for some of the new licences as Vodafone, and Hans Snook, the outspoken Orange chairman, wants to shake up the European mobile market the same way he has transformed it in the UK.

Tempting targets

The deal will leave the remaining telecoms companies scrambling for merger partners themselves.

The most aggressive is likely to be the Dutch telecoms company KPN, the fifth largest in Europe, which just beat off France Telecom for control of Germany's E-Plus mobile network.

KPN has been building a war chest for acquisitions in conjunction with the world's most highly valued mobile operator, Japan's DoCoMo, and Bell Atlantic.

Earlier, it was linked to Spain's Telefonica, which also owns the leading mobile phone company in Spain.

Telecom Italia Mobile could also be a tempting target, although overburdened with debt from an earlier takeover deal.

France Telecom would be ideally placed to move into this market, while Vodafone already has a substantial business acquired when it took over Mannesmann.

And then there is Scandinavia, where mobile phone penetration is higher than anywhere else in Europe.

Following the breakdown of merger plans between Sweden's Telia and Norway's Telenor, Telia is being privatised - and may become a takeover target itself.

Sonera, Finland's mobile phone operator, also has pan-European ambitions.

That leaves BT and Deutsche Telekom, the remaining giants of the fixed line world.

Both have strong mobile phone businesses in their home countries, but have been foiled in attempts to form European partnerships, although Deutsche Telekom has entered the UK market with its One2One purchase.

But they will have to be quick on their feet to catch the new mobile leaders - or, like BT, risk being left behind in the new telecoms world.

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