Analysis: European telcos’ merger hopes help close Atlantic gap

A bourse trader uses a cell phone during a trading session on the trading floor at Frankfurt's stock exchangeBy Leila Abboud and Harro Ten Wolde PARIS/FRANKFURT (Reuters) – A rally in European telecom stocks has closed the big valuation gap with U.S. peers seen nine months ago, boosted by hopes that regulators will allow more mergers in the industry as it starts to recover from the bruising recession. A series of telecoms and cable industry deals this year has helped fuel speculation that competition regulators will loosen the leash on mobile firms wanting to merge to encourage the investment needed for Europe to catch up on building faster broadband networks. At the same time Europe's sovereign debt crisis which pushed up corporate borrowing costs has abated, leaving many of its telecom companies in better financial shape after they cut debt and raised new equity instead. The ratios are now at 13.9 times forecast earnings for Europe and 14.5 for the U.S, according to Thomson Reuters data.

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