• The team at professional services giant Deloitte has rubbed its crystal ball and offered its TMT predictions for 2025
• It expects to see more M&A in the telecom sector, particularly in Europe, as regulators shift the focus of their concerns
• Broader choice of connectivity alternatives also a major driver of change
• Turning to FinOps teams and tools could cut enterprise cloud costs by up to 40%

Europe will be a hotbed of telecom takeover activity in 2025, a trend that will lead to a year-on-year increase in the number of merger and acquisition (M&A) deals struck worldwide in the sector to around 400, according to the team at professional services firm Deloitte. 

We’re just getting to the time of year when all manner of firms like to share their prognostications (of variable quality) for the 12 months ahead and the team from Deloitte is early out of the blocks with its comprehensive TMT (tech, media and telecom) Predictions 2025. It’s a wide-ranging publication covering, among other subjects, the likely developments in the fields of generative AI, cybersecurity, media, cloud and, of course, telecom.

Deloitte’s views on telecom M&A activities – which encompass total or partial acquisitions, the creation of joint ventures using existing assets, spinouts and more – is particularly interesting. Given that many second-tier, subscale wireless service providers are carrying significant debt whilst experiencing limited growth and struggling to achieve profitability, Deloitte predicts the sector will continue to consolidate during 2025. 

In particular, it believes there will be a notable uptick in activity in the European Union (EU), where regulators are expected to be more likely to approve deals as their focus shifts from encouraging and enabling multiple operators to compete (to help keep prices comparatively low) to accepting that future network growth, security and resilience might only be possible by network operators with greater scale. 

As a result, the Deloitte team predicts there will be some 400 telecom M&A deals announced globally next year, up from the 388 anticipated for this year.  “That may not be that interesting,” states the Deloitte team, but “what is interesting is the kind of M&A deals we predict we’ll see more of: Actual operator consolidation.”

At the core of the prediction is the trend towards more “governments and regulators globally… allowing mergers. Since 2020, there have been 13 telecom mergers or joint ventures that have decreased the number of customer-facing players, which have been approved or are in the process of approval by governments and regulators.” Six of these have been in the Americas (three in the US, one in Canada, one in Chile and another in Colombia), five in Asia Pacific (Indonesia, Malaysia, Thailand, Taiwan, and Australia) but only two in Europe (the Netherlands and Spain). 

The report points to the proposed merger of Vodafone UK and Three, a deal already announced that is on course to be completed in 2025, but adds also that proposed mergers in Italy and Denmark were denied in recent years. Clearly, though, the Deloitte team expects M&A proposals in the EU zone to have a greater chance of being approved from next year onwards.

And there is increasingly vocal support for giving the green light to operator consolidation: For example, earlier this year in Europe, the former prime minister of Italy, Enrico Letta, pressed the EU to act after a whitepaper acknowledged the return in investment challenges telcos have been experiencing in a highly fragmented and competitive market.

Interestingly, the Deloitte report notes that the average number of subscribers per (facilities-based) mobile operator in Europe is 4.5 million, while it is 95 million in the US, 300 million in India, and 400 million in China. Such variations in scale indicate that consolidation in Europe would be a relatively easy and straightforward means of increasing the subscriber base of fewer operators. Most European nations have two financially and technologically strong mobile networks, with a third, not quite as strong but nonetheless substantive and important.

Sometimes there are fourth and even fifth and sixth players per country, financially weaker and with too few subscribers to be able to afford to compete effectively enough to worry the big boys. That’s where consolidation is most likely to happen. The general regulatory and governmental consensus seems to be that the market would best be served by a triumvirate of network operators of which the third member would, for the most part, be the underdog, but one with enough bite to ensure genuine competition and prevent a drift into duopoly situations, under which subscribers would lose out by paying more for less innovation. Where there is no effective competition, cutting edges are blunted and services stagnate.

Greater options, 5G travails and a 6G timeline

Other factors that could well affect subscriber-facing consolidation is the fact that the choice of connectivity alternatives is so much broader than it used to be. Take, for example, fixed wireless access (FWA) as an alternative in the home broadband services sector: Deloitte predicts that more than 30 million homes will be signed up to FWA-enabled broadband next year, a year-on-year increase of 20%. Meanwhile, low-earth orbit (LEO) satellite competition for home broadband, especially in rural and remote areas, is surging with more than 3 million premises around the world now connected, and several new such systems expected to be launched next year and in 2026.

It is also worth remembering that 5G still looks more like a solution in search of a problem to solve and most operators are still struggling to monetise and make any reasonable returns from their massive investments as, in the consumer market, many users are quite happy with 4G and unwilling to pay a premium for a service that appears to offer little more than the potential for faster data downloads. Meanwhile, there are many places around the world where 3G continues to provide services and apps that users are content with for the time being – and that could well be several years. Furthermore, mobile virtual network operators (MVNOs) are gaining subscriber share from established players and piling on the competitive pressure. 

On the upside for the mobile operators, the costs of maintaining their network assets are falling. The purchase of 5G spectrum, together with its deployment, has been hugely expensive but those costs are now working their way through balance sheets. Meanwhile, 6G, the proposed universal communications nostrum for the world, is still years away, much to the relief of the telcos that would have to pay for its deployment. Deloitte believes there are no signs that 6G will arrive before 2030. 

Deloitte adds that the intensity of annual capital expenditure will fall back from an average of 17.8% of revenues in 2022 to the 15% to 16% range from 2025 to 2029. That’s good news for network operators, but bad news for the vendor community that will need to find growth elsewhere. 

FinOps teams will manage cloud investments

The Deloitte report also examines the cloud infrastructure services sector and predicts that global spending here is likely to exceed $825bn in 2025. It’s an enormous sector and growing at pace as organisations and enterprises of every stripe rely increasingly on cloud services for their daily existence and to underpin applications such as AI, data analytics and remote working. The report discloses that, currently, 73% of companies operate a hybrid cloud infrastructure, mixing private resources with public cloud services, and notes that 53% of companies “source cloud services from multiple providers to take advantage of promotions, specific capabilities or avoid vendor lock-in.”

Cloud’s scalability is a great asset but, while it can be easy and quick to spin-up new environments and apps, cloud it is undeniably expensive. As the report points out, it costs considerably more than the equivalent private infrastructure, and is fast becoming a company’s largest IT line-item bill. With that expense weighing heavily on budgets, organisations and enterprises are beginning to turn to FinOps teams (a mash-up of finance and DevOps) as part of their organisational structure, with a brief to manage cloud investments and to monitor and optimise cloud spending. 

It is a necessary development. Organisations and enterprises often bust their cloud budgets, overspending by an average of 15.6% per annum and the Deloitte report forecasts that, next year alone, the adoption of FinOps tools and practices will save $21bn globally and even more in 2026 and 2027. It is predicted that FinOps could cut cloud costs at some enterprises by 40%.

The report also advises that global IT spending will rise to more than $5.1tn in 2025, driven mainly by ongoing digital transformation efforts and AI investments. Interestingly, private infrastructure continues to account for around half of all workloads which, if migrated to public cloud, could significantly inflate the cloud bill.

– Martyn Warwick, Editor in Chief, TelecomTV