European telecom operators should consider forming joint radio access network companies—RanCos—as a more effective route to boost returns and cut costs, without triggering regulatory pushback associated with full-scale mergers, according to Barclays (LON:BARC).
While investor focus remains on traditional in-market consolidation, the bank believes RanCos could deliver comparable synergies while preserving retail competition.
Although mergers such as Orange/MasMovil in Spain and Vodafone/3UK in the U.K. have shown the potential for “4 to 3” market consolidation, Barclays notes that “3 to 2” mergers raise heightened concerns for European Commission authorities.
RanCos, by contrast, preserve retail competition while delivering network synergies, potentially making them more palatable to regulators.
“We believe RanCo combinations offer a better route to drive returns, while minimising competition authority concerns,” Barclays analysts led by Maurice Patrick said in a note.
The concept, which goes beyond passive or even active sharing, involves the full integration of mobile radio infrastructure and spectrum.
“The creation of a RanCo takes co-operation much deeper, involving the combining of nationwide radio infrastructure, and spectrum. Although most operators have stopped short of this, it is not a new concept in EU Telcos,” the note continued.
According to Barclays, this model could unlock substantial cost savings—around 20% of RAN-related opex and capex—translating to a 15% boost in pro forma operating free cash flow (FCF).
Beyond cost efficiency, RanCos could also limit market distortions caused by aggressive MVNO pricing strategies and reduce spectrum auction costs by consolidating bidders.
