A majority of Britons last Thursday voted to leave the European Union in spite of serious concerns expressed by scores of economists about the possible fallout of such a move. European stock markets including London’s FTSE 100 have already declined sharply following the announcement of the result and the Sterling, too, have taken a tumble against major currencies like the Dollar and the Yen. With all of that going on in a very public and unsettling fallout of the referendum, one industry that is set to get hit real hard is telecommunications. Stocks of leading European telecom companies like Vodafone and Deutsche Telekom have been trading lower following the developments, and murmurs from leading communication companies about relocating their company headquarters have also started getting louder, with Vodafone, O2 and Liberty Global all hinting that such a move may well be on the cards depending on how things go once the U.K triggers Article 50 of the Lisbon Treaty to officially announce that the country is ready to move forward with its decision to get out of the EU.
Another casualty of Brexit is Spanish Telecom giant, Telefonica SA, whose efforts to find a buyer for its U.K. business is now in limbo. Telefonica has been looking to sell its stake in British wireless carrier O2 for a while now, but EU regulators had blocked an earlier attempt by the company to merge with Hutchison Whampoa-owned ‘3’, which happens to be the fourth-largest wireless carrier in the country. However, O2’s Spanish parent has now announced that it will not be looking to sell its British subsidiary anymore, saying that the sale will go through only when “market conditions are deemed appropriate”. In a statement filed with the regulators on Wednesday, Telefonica said that it will now consolidate O2 back into its financial statements, and no longer report the business as 'discontinued operation'.
While the decision may or may not be directly related to the result of the referendum, industry watchers are of the opinion that Brexit may have certainly had a role to play in its decision. Telefonica’s stock has been trading about 8% lower since Friday, when the result of the Brexit referendum was announced. It remains to be seen how things go from here, but this is just another example of the problems Brexit is creating for British and other European businesses, and unfortunately for everyone involved, things are only likely to get progressively worse from here.