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Week Ahead (19 February)



Monday, 19 February – Von der Leyen to kickstart her campaign for a second term 

Today, Ursula von der Leyen is set to kickstart her campaign for a second term as the President of the European Commission. Attending a meeting of the Christian Democratic Union (CDU) in Berlin, von der Leyen, who was also previously linked to NATO’s top job, is expected to receive the party’s formal endorsement just ahead of the official deadline to enter the race.  Additionally, she will formally present her candidacy to be the European People’s Party (EPP) lead candidate during the EPP’s Congress in Bucharest on 7 March where she will need the support from at least two other member parties aside from her own CDU. As the biggest EU country, Germany has a significant influence over who gets the top job in Brussels.  In this case, EPP will back von der Leyen, despite finding herself at odds with the group earlier last year over climate policy.   

 

Even though von der Leyen could face no direct contenders, her path to re-election hinges on both the EU election results in June and the approval of 27 EU leaders.  The traditional pro-EU alliance between the EPP, Socialists & Democrats, and the centrist Renew Europe is projected to secure only a narrow majority in the European Parliament due to the rise of eurosceptic right-wing forces. Hence, von der Leyen may need to navigate with different political groups without jeopardising her legacy on green policies. Despite coming from a different political family (the EPP-affiliated CDU), the German traffic light coalition (Party of European Socialists, Renew Europe, and the Greens) will likely support her candidacy, as having a German in the EU's top job is seen as a key advantage from a national point of view. Hence, von der L

eyen is favoured to win a second term, capitalising also on her Presidency’s track record in dealing with the COVID-19 pandemic and the impact of the war in Ukraine. 

 

Wednesday, 21 February – White paper on telecommunications network investment to be presented by the Commission, indicating greater openness for cross-border mergers 

On Wednesday, the European Commission will unveil its white paper on telecommunications network investment, which could serve as the blueprint for the Digital Network Act, expected later in 2024. The Act will aim to address ‘’barriers to a true telecoms Single Market’’ with the goal to submit a formal proposal before the summer of 2025. 

 

According to a leaked draft of the white paper, the Commission once again warns that the bloc is falling behind in its 2030 digital infrastructure targets. Citing the 2023 Report on the Digital Decade, the white paper puts further emphasis on delays, such as in the 5G rollout and fibre coverage, especially compared to the US, South Korea, and Japan. Drawing a comparison with the US market, the report acknowledges that the ‘’fragmented nature of the European telco market’’ has been ‘’one reason for the smaller size of European investment opportunities’’, highlighting the existence of around 50 mobile operators over 100 fixed operators in the bloc.   

 

To that end, it entertains the idea of ‘’cross-border consolidation or different forms of cooperation upstream’’ to increase scalability ‘’without compromising downstream competition''. This means that in its white paper this week, the Commission will explicitly indicate its openness to European telecom mergers as a means to effectively finance the deployment of 5G and fibre networks, following years of reluctance to approve mergers reducing the number of operators from four to three in a market. This will also be in line with several calls on the need for consolidation from the Internal Market Commission Breton over the past year.  

 

Regarding the ‘’fair share’’ proposal, the report acknowledges the potential need for regulatory intervention in order for all entities, including large tech companies, to contribute financially to utilising telecom infrastructure. However, it is not expected to be part of the upcoming Digital Networks Act and will most likely be left for the next Commission. 

 

Thursday, 22 February – European Commission’s final decision on Orange-MasMovil deal 

On Thursday, the European Commission is expected to announce its final decision on the proposed €18.6 billion merger between Orange Group and MásMóvil, Spain’s second and fourth largest telecom operators respectively, following the launch of an in-depth investigation (Phase 2) in April 2023. 

 

In July 2022, the two companies signed a binding agreement to combine their operations in Spain. In December 2023, the two companies proposed remedies and Romania's Digi Communications has been selected to buy assets that Orange and MasMovil plan to divest to address EU antitrust concerns.  Following an extension of the initial deadline to take a little more time to review the commitments, the Commission is expected to greenlight the deal this week, after the two companies agreed to sell 60 MHz of radio spectrum to Digi and provide an option for a national roaming service agreement.   

 

Since 2014, Competition Commissioner Margrethe Vestager has blocked several telecom M&A deals to promote competition. For years, the larger European telecom operators have argued that greater scalability through mergers and acquisitions would benefit innovation, helping them develop new products and services. They also argue that consolidation would help the EU keep up with China and the US in its digital transformation.  

 

Thus, the case could be an interesting test of the Commission’s appetite for greater market consolidation in the telecoms sector, which will also be reflected in the release of the white paper the previous day. Nevertheless, despite the increased calls for consolidation, it is worth noting that the Commission would not have signed off on the Orange-MasMovil merger without in effect strengthening a fourth operator in the form of Digi.  Therefore, while there is undoubtedly momentum towards consolidation, the fact remains that the Commission still prefers four operators in each EU market. This is likely to change upon Vestager’s exit from her role as Competition Commissioner.  

 

Thursday, 22 February – ECB to release minutes of its January meeting amid growing debate over monetary easing 

On Thursday, the ECB releases the minutes of its January meeting, where the Governing Council (GC) left interest rates unchanged at 4% for a third consecutive time.  Over the past week, dovish elements of the GC have made the case for not waiting too long for monetary policy easing.  ECB Executive Board Member Piero Cipollone said last Monday that Eurozone demand is weak and that monetary policy does not need to dampen it further.  Fellow Italian and Bank of Italy Governor Fabio Panetta also said publicly last week that the time for interest rate cuts is fast approaching.  While the Italians would be expected to make such comments, momentum towards faster rate cuts has increased following the intervention of France's Francois Villeroy de Galhau who last Friday warned that ‘’acting gradually and pragmatically can be preferable to deciding too late and then having to over-adjust'’ and that “the risk of cutting too late is at least as big as too early”.  The diversion of opinions within the GC is also reflected in the latest projections of investors, who, according to a Bloomberg survey, assign about a 50% chance of a cut in April.  Investors are likely to pore over Thursday’s minutes to look for further indications of monetary policy easing in the short term.   

 

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