With the days of planting flags across the globe long gone, western European telecoms are unlikely to rush to merge even as deep-pocketed emerging market rivals entertain deals at the edges of their territory.
Deutsche Telekom's $39 billion exit from the United States has intensified scrutiny on whether Europe, a market of roughly the same size, has too many operators, bankers said at the Reuters Global Mergers and Acquisitions Summit on Tuesday.
Larger EU markets like Britain could probably support four mobile companies and smaller countries could support three, said Jeff Murphy, co-head of telecoms, media and technology (TMT) for Europe, the Middle East and Africa (EMEA) at Credit Suisse.
France Telecom and Deutsche Telekom merged their British operations in 2009, leaving Hutchison Whampoa's 3 as the smallest of four players and the most likely target for consolidation.
Hutchison's 3 is also the smallest mobile carrier in Austria, where Mobilkom Austria, T-Mobile Austria and Orange Austria are the major players.
But some regulators fear fewer companies would stifle competition.
(UK regulator) Ofcom has been pretty clear that they want to see four network operators, said Dan Bailey, head of EMEA TMT at Citigroup.
Shareholders of western European telecom companies were wary about larger, cross-border M&A, the bankers said.
The sector has become a yield play from a public market perspective, so the reason people generally buy stock is because they are going to get a good dividend, said Jean Abergel, head of media and communications, EMEA, at Morgan Stanley.
Britain's Vodafone, exiting markets where it is weak after a decade-long acquisition spree, typifies pursuit of a leaner and more focused model that investors now prefer.
Emphasis on smaller footprints means that a long-imagined merger of France Telecom and Deutsche Telekom is further away than ever.
The value creation that comes from it probably isn't big enough in the eyes of the key shareholders to warrant the pain, Murphy said.
Bailey said Vodafone and Deutsche Telekom, having slimmed down their portfolios, might gain a sustained valuation premium over companies further behind on this process.
There is a clear gap to what they have done and what France Telecom has done, he said.
The bulk of dealmaking activity is expected to continue in the emerging markets, bankers said.
There are some very strongly capitalized (emerging markets) companies out there that are ambitious and determined to build scale. Look at Bharti or Etisalat, he said.
A number of Gulf companies could make moves into Europe, although not necessarily mainstream western Europe, Murphy said.
There has also been a lot of talk over the last two years of Russian companies taking stakes in Nordic telecom operators as a way to unlock existing-cross shareholdings arrangements, he said.
Morgan Stanley's Abergel said this would not trigger a knee-jerk reaction from western European companies, however.
Management teams of large western European incumbents know what their strategy is about, people will stick to their existing plans.
People are not here to build empires anymore.
(Additional reporting by Kate Holton and Paul Sandle; Editing by Erica Billingham)