European telecoms: crackly line - FT.com The line could get very crackly soon in Europe's telecoms sector. An €8.5bn deal between Telefónica and KPN to merge their German mobile units could head for the regulatory thicket this week if EU antitrust officials open an in-depth probe. Such a move would not be surprising. The merger would cut the number of big players in the region's largest mobile market from four to three and create a business to rival that of current leaders Deutsche Telekom and Vodafone. It took a year to secure approval for similar four-to-three consolidation in the smaller Austrian market in 2012 - and that came with conditions attached. This time, remedies will be key, not least for other operators assessing the regulatory concessions to be paid for consolidation. Given the need for this revenue-challenged sector to squeeze out efficiency gains, more clarity on those concessions is badly needed. Telefónica and KPN's German deal promises synergies with a net present value of €4bn-€5bn. And, yes, the links between greater operating efficiency and more investment can be oversimplified. Still, the fact remains that Europe's telecoms sector is lagging badly on the capital spending front. Industry data suggests that capex growth was non-existent in the EU last year against gains of 7-8 per cent in the US - and will dip 1 per cent in Europe in 2013. Regulatory pressure on operators" revenues is easing, however, and better economic conditions help. These trends have lifted Europe's telecoms sector index by a fifth in 2013. But balance sheets are still a work in progress - witness forecasts that dividends (Telefónica excluded) will be down by a sixth this year. The knock-on effect for telecom equipment makers should not be forgotten. Consensus estimates are for only 3 per cent sales growth at Ericsson in 2014, for example, as the rise in network spending in the US ebbs and Europe fails to take up the running.