LIVE MARKETS-Consolidation could drive telcos higher in 2026, say JPM

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CONSOLIDATION COULD DRIVE TELCOS HIGHER IN 2026, SAY JPM

There was lots of M&A talk in the European telecoms industry in 2025, but not a lot of action. JPMorgan reckon 2026 "should deliver actual deals" and be the "key source of alpha" for the sector.

In a big outlook piece, published Friday, telco analysts at the Wall Street bank say the telecoms still "has some of the lowest returns of any major industry, and also remains far more fragmented than other major global TMT industries."

They reckon consolidation is the key to this changing, as they argue markets with four main players, such as France, face a bleak revenue outlook, low return on capital employed, and, as a result, operators trade on extremely cheap multiples.

They say cheap mobile data packages in France and Italy mean it is "not possible for operators to generate an acceptable return on capital."

In contrast, in the Netherlands, where there are only three major operators, there is structural revenue growth and rich valuations.

Various policy changes are underway in Europe, which JPM thinks will make deal making easier.

And several of their top picks are in markets where they see consolidation likely, particularly France where they see it likely to begin.

These top picks include Orange ORAN.PA and Bouygues BOUY.PA

Altice France, the owner of telecoms firm SFR, rejected a joint bid for SFR from Orange and Bouygues as well as Iliads Free in October.

(Alun John)

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