On 16 July, the European Commission presented its highly-anticipated €2 trillion budget proposal for 2028–2034, marking a clear pivot toward economic competitiveness.

Among its most striking components: a new €450 billion Competitiveness Fund and a reshaping of the EU’s traditional spending patterns, reducing the weight of traditional funding pillars like agriculture and regional aid in the bloc’s multi-year cash pot. While most of the EU budget is financed by member states, the Commission has stirred controversy by proposing not only a major budgetary increase but also new ‘own resources,’ with the EU’s frugals, such as Sweden and the Netherlands, predictably pushing back against the idea of new EU-level taxes to fund the competitiveness agenda.

Amid Europe’s lagging industrial might and intra-EU division on funding sources, the EU will need to look for innovative ways to unlock investment in its strategic industries. As Mario Draghi has rightly emphasised, the EU should pursue market consolidation in strategic sectors, with the former Italian PM citing telecommunications as a priority industry for high-impact mergers needed to fuel digital innovation and catch up with global competitors. The involvement of high-profile industry players like Patrick Drahi – whose ongoing dismantling of the Altice empire has placed SFR at the centre of potential consolidation – underscores just how closely investor strategies are now aligning with Brussels’ new policy direction.

Competition sea change in Brussels

Released last September, Mario Draghi’s report on ‘The Future of European Competitiveness’ has anchored and further shaped the Commission’s pivot toward strengthening industrial and innovation capacity following years of stagnation that have left the bloc trailing significantly behind the US and China. In the ensuing months, the EU’s emerging competitiveness drive has drastically shifted the political mood around historic taboos.

Draghi’s call for telecoms market consolidation notably echoes a long-standing push by France and Germany to build EU champions – an idea that, as merger lawyers have affirmed, “was impossible to push” under former EU competition chief Margrethe Vestager. But with Teresa Ribera leading EU competition policy, “there is more openness now to discuss consolidation.” Though light on specifics, Ribera has signalled a more flexible decision-making approach for mergers that places more weight on innovation to fuel growth and competitiveness.

Celebrating this new regulatory direction, Alessandro Gropelli, Director-General of the industry association Connect Europe, recently claimed that “political awareness” of the need for consolidation “had never been higher” – backing which has come at a truly critical moment. Highlighting the gravity of the situation, Connect Europe research published last January found that Europe’s per capita telecoms investment in 2023 was nearly doubled by the US – €117.9 versus €226.4.

As Draghi warns in his report, deep fragmentation in the EU telecoms market remains the primary culprit behind the bloc’s lagging investment compared to global leaders. The EU has a whopping 34 mobile network operators (MNOs) and 351 non-investment-based virtual operators (MVNOs), compared with only three and four MNOs in the entire US and China, respectively. Crucially, this market fragmentation leads to insufficient scale, intense competition and decreasing revenues, resulting in EU telcos’ chronic under-investment in fiber and 5G, as well AI and 6G.

Patrick Drahi’s burgeoning SFR deal reflecting telcos’ cautious optimism

Encouraged by Brussels’s changing stance amid the increasingly urgent need to accelerate Europe’s €200 billion digital transformation, EU telecoms companies are already preparing deals in hopes of looser merger rules during the current Commission term. As an experienced telecoms M&A lawyer recently asserted, “once the Commission green lights one major deal, we’ll see a wave of consolidation” to boost profitability and help unlock digital innovation investment.

SFR, France’s second-largest telco, is among the frontrunners in this seismic industry shift. As reported by the Financial Times in mid-July, French telco rivals Orange, Bouygues and Free are in talks to carve up SFR – an unprecedented deal that would reshape the national telecoms market. This move comes as SFR owner, French businessman magnate Patrick Drahi, begins dismantling his Altice empire – whose main asset is SFR – after the group’s debt reached €25 billion last year.

Faced with rising interest rates, Drahi has been restructuring Altice’s debt and selling off assets to appease creditors, navigating these pressures with characteristic shrewdness. Drahi is now open to selling SFR, convinced that a break-up involving multiple buyers is the best way forward – both for maximising the company’s sale value and avoiding the competition issues that would stem from a single firm’s attempted acquisition.

A February debt deal which cut Altice’s debt liabilities from €24 billion to €15.5 billion has cleared a path for SFR’s sale, which analysts estimate could fetch €21 billion. Aiming for a slightly-higher valuation of €23 billion – including €15 billion in debt – Drahi’s strategy is clear and clever: deleverage Altice by offloading valuable but underperforming assets like SFR, thus boosting the group’s stability and profitability in a market politically-primed for consolidation.

EU’s chance for an early win

 The potential sale of SFR comes at a pivotal moment, as the European Commission signals a shift toward embracing consolidation. Despite recent losses, SFR still serves 20 million mobile and 6 million broadband customers – assets eagerly eyed by Orange, Bouygues and Free. A carve-up deal is seen as a test case for whether EU regulators can finally endorse consolidation without reigniting old fears over consumer price hikes.

While fragmentation has certainly kept prices low, it has drained operators’ revenues and stretched their capacity to invest in parallel 5G and fiber rollouts. Greater market concentration may lift prices, but it would also unlock the investment needed for next-generation networks. As Draghi argues, Europe must rebalance: accepting modest price increases in exchange for faster deployment of high-quality networks and long-term competitiveness in a strategic sector lagging behind global rivals.

If a deal moves ahead, it will likely follow the completion of Altice France’s restructuring in October. That leaves the Commission with a clear early test: will it turn its evolving rhetoric into regulatory action? Endorsing this deal would send a powerful signal that Brussels is ready to prioritise scale, investment and industrial strength.

If the EU is serious about reclaiming its economic edge, it must move beyond old taboos and embrace bold structural reform to unlock competitiveness funding. That means not only investing ambitiously through its 2028-2034 budget but clearing the path for consolidation in sectors where fragmentation has long stifled growth. The telecoms market is a case in point, with France’s SFR offering an early example that can lead the way and inspire a broader acceleration of this market dynamic.

Photo by Guillaume Périgois on Unsplash