Mobile execs urge more consolidation in Europe

Shaky European markets and scarce capital had the heads of the largest European wireless firms unanimously calling for more consolidation at an industry conference this week."

Consolidation will eventually be here," said Gervais Pellissier, deputy chief executive of France Telecom SA at the Morgan Stanley Telecom, Media and Technology conference in Barcelona.

Speaking about the company's home market, Pellissier said the large number of competitors was dragging down profits for everyone. That scarcity of capital makes it hard to build next-generation networks for consumers.

Vodafone Chief Executive Vittorio Colao also called for consolidation, arguing that it was the only way to create companies with enough capital to invest in all areas of Europe.

Royal KPN NV's chief Eelco Blok on Wednesday raised the prospect of buying the Dutch assets of Swedish telecom firm Tele2 AB and Telefonica SA's German O2 unit.

Mr. Blok says he's keen on in-market consolidation to create value, adding that a deal between the operator and O2 could create EUR3 billion in value. He declined to specify what he meant. Both deals at this stage look unlikely.

Behind the cry for more deals is weak economic growth in Europe, as countries grapple with unwieldy debt.That is putting pressure on the operators to shore up their cash reserves and reassure jittery investors they can make good on their debts.

Pellissier said France Telecom has continued to consolidate its cash and debt positions, because the company is getting more questions on debt and liquidities than it has in the past. He linked the pressure to the current market environment -- not the company's position.

Former Spanish telecommunications monopoly Telefonica SA also tried to reassure investors on Wednesday that the company has enough cash flow to operate the business, as the Spanish government implements stringent austerity measures to pay off its debts.Speaking at the same conference, Angel Vila, Telefonica's chief financial officer, said the company is cutting costs and selling non-core assets to improve its cash flow.

Credit rating company Standard & Poor lowered Telefonica's debt rating in August, citing an aggressive dividend policy in the face of lower revenue and cash flow expectations.