Finance
Telefonica looks to M&A to give European telecoms broader vision
Published by Global Banking & Finance Review®
Posted on September 8, 2025
5 min readLast updated: January 22, 2026
Global Banking & Finance Review®
Company
Published by Global Banking & Finance Review®
Posted on September 8, 2025
5 min readLast updated: January 22, 2026
Telefonica seeks to expand its European telecom presence through strategic M&A, selling Latin American assets to fund acquisitions.
By Andres Gonzalez
LONDON (Reuters) -Spanish telecoms group Telefonica is looking to buy telecom assets and free up resources by selling its Spanish-speaking Latin American assets, as CEO Marc Murtra plots a broader vision for Europe's telco sector.
The group is eyeing assets in Germany, the UK, Spain and Brazil, Murtra told Reuters as he prepares his first strategic plan for Telefonica after taking the helm in January.
While wanting to chase scale, the Spanish group must maintain its investment grade credit rating, he said.
Regulators have long pushed back against mergers between European operators, fearing a few dominant players would be able to increase prices and margins to the disadvantage of the consumer, but Murtra argues that Europe's market is too fragmented.
In 2024, there were 41 companies in Europe that offered mobile services to more than 500,000 customers each, compared with five in the United States, four each in China and Japan and three in South Korea, according to Connect Europe.
Murtra, who was president of Spanish defence and technology group Indra until early this year, says the market is changing with the development of new technologies including AI, and Europe needs to keep up or lose out.
European telecom groups should be allowed to expand and in exchange invest in other, related sectors such as cybersecurity and infrastructure including data centers, as a "social contract" between authorities and companies, he said.
"If Europe wants strategic autonomy and technology, we're going to have to have large or titanic European technology operators," Murtra, 52, told Reuters.
"I don't want to be overly dramatic, but imagine a Europe where the satellite systems, the hyperscalers and artificial intelligence are in the hands of tech bros - and this could happen."
Murtra, who is also Telefonica's executive chairman, has been speaking in recent months to regulators and leaders about his proposal, according to a person familiar with the talks. Reuters could not determine how those conversations were received.
"This does not require a titanic shift," Murtra said of his plan. "All it needs is to lift the brake pedal a little bit and allow the market to operate and consolidate."
POTENTIAL TARGETS
The sector is showing some signs of M&A activity, including reports that Orange, Bouygues and Iliad are exploring a deal to carve out Patrick Drahi's French telecom operator SFR. Owner Altice said it had not received any offer.
To give Telefonica financial headroom to do more dealmaking, the company has agreed to sell its units in Argentina and Uruguay, and is working with advisors on potential sales in Chile, Mexico and Ecuador, according to three sources with knowledge of the talks. Telefonica declined to comment.
The sales could unlock up to 3.6 billion euros ($4.21 billion) in firepower for M&A, according to analysts at Kepler.
Telefonica would not comment on reports it is considering a capital raising to fund acquisitions.
Potential targets for Telefonica could include Vodafone Spain, a joint venture or the acquisition of 1&1 in Germany, assets in Brazil, or even a 50% stake in Virgin Media O2 held by its partner Liberty, according to dealmakers familiar with Telefonica's thinking and analyst reports.
Vodafone Spain and VMO2 declined to comment, while 1&1 said it doesn't comment on market rumours.
Telefonica declined to comment on targets.
A CONDITION FOR MERGERS
Murtra was parachuted in by the Spanish government to lead Telefonica in January.
The group's shares have since rallied as the company readies to present a new strategy by the end of the year. But its market capitalization has still halved since 2015 and its shares are among the top 10 most shorted in Europe, excluding the UK, according to S&P Global Market Intelligence Data.
Some analysts see merit in Murtra's proposal.
"The regulators gain strategic investments and improvement in the quality of the networks, and on the other side, you have the operators gaining scale, which is absolutely fundamental in this industry," said Carlos Winzer, senior vice president at Moody's.
European Union regulators have been considering easing rules for telecom mergers.
Geopolitical tensions have added to the urgency, with Europe planning to pour billions into defence and critical infrastructure, which includes telecom networks, bankers said.
"The geopolitical situation will help make European authorities more open to listening. They have no alternative, because the telecommunications sector is constrained and can no longer attract cheap capital to continue investing in infrastructure," said Javier Cabrera, market analyst at XTB.
Some investment bankers predict active consolidation within countries over the next couple of years, which could be followed by cross-border dealmaking.
"Telefonica's push could trigger others," said Winzer. "There are other incumbents throughout Europe, like Orange and like Deutsche Telekom and BT , which may follow Telefonica's initiative if there were to be M&A, especially in markets where there are four or more operators."
($1 = 0.8542 euros)
(Reporting by Andres Gonzales in London; aditional reporting by Amy-Jo Crowley, Editing by Anousha Sakoui and Susan Fenton)
Telefonica is looking to acquire telecom assets while selling its Spanish-speaking Latin American units to free up resources for mergers and acquisitions.
Potential targets include Vodafone Spain, 1&1 in Germany, assets in Brazil, and a 50% stake in Virgin Media O2.
Regulatory pushback against mergers in Europe poses a significant challenge, as regulators fear that consolidation could lead to higher prices for consumers.
Geopolitical tensions could prompt European authorities to be more open to mergers, as the telecommunications sector needs to attract investment for critical infrastructure.
The sale of Telefonica's units in Argentina and Uruguay could unlock up to 3.6 billion euros for further M&A activities.
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