MILAN (Reuters) - Shares in European telecoms rallied across the board on Monday after a report saying the European Commission was set to clear a merger in the Netherlands fueled fresh optimism about deal-making in the sector.
People familiar with the matter told Reuters that Deutsche Telekom (DE:DTEGn) is likely to win unconditional EU antitrust approval for its bid to buy Swedish peer Tele2's (ST:TEL2b) Dutch unit.
The report sent shares in Tele2 rallying 9 percent, while Dutch market leader KPN (AS:KPN) surged more than 4 percent and the broader European telecoms index (SXKP) shot up over 3 percent in afternoon trading.
"The Dutch telecom market will consolidate from four to three players with the approval of the Deutsche Telekom - Tele2 deal, reducing competition," said Jauke de Jong, a research analyst at AFS Group in Amsterdam.
He said the deal also indicated that the European Commission could have a more favorable stance towards consolidation in other European countries such as France.
Several telecoms shares such as Vodafone (L:VOD), Telefonica (MC:TEF), Telecom Italia (MI:TLIT), Swisscom (S:SCMN) and BT (L:BT) and Orange (PA:ORAN) spiked higher on the report.
Telecoms have been underperforming over the past few years as pricing pressure, competition and costly network upgrades have been squeezing margins, keeping investors away.