A string of investments by infrastructure funds fueled a first-half private equity resurgence in the European telecom industry as mobile operators and shareholders shed capital-intensive assets.

European private equity telecom transactions disclosed in the first six months of the year hit €9.24 billion, compared to €1.92 billion in deals a year earlier, according to data from S&P Global Market Intelligence. Taking Altice Europe NV's tower sales and other undisclosed deal values into account, total estimated values are likely to have topped €12 billion.

Some industry observers believe that a number of challenging market conditions could be fueling opportunistic transactions.

With low revenues and profitability plaguing mobile market across Europe, divesting cellular assets is one way of improving balance sheets, according to William Webb, former director at British telecom regulator Ofcom and CEO of internet of things organization Weightless SIG.

"It's a symptom of a sector that is in a relatively bad way with few new business opportunities on the horizon," he said.

Growth in the European telecom market has also been limited by significant fragmentation. Despite years of consolidation, the region has more than 120 major mobile operators serving a population of 739 million, compared with just three operators in China covering a market of around 1.3 billion people, or four major players serving around 325.7 million people in the U.S.

"If you look at the European market, particularly in comparison to the U.S., they are highly fragmented and there are some issues there in terms of [scaling opportunities]," CCS Insight analyst Kester Mann said in an interview.

Given some of the challenges that European operators are facing, renewed deal activity in an industry where investor interest had been waning in recent years could be related to the need for support with costly network deployments and financing 5G networks, according to Mann.

He added that with 5G becoming an area where a huge amount of financing is required but the potential returns for operators are somewhat unclear, this could be a strategy by operators to de-risk their investments.

The surge comes after a lull in dealmaking from the prior year, partly due to heightened regulatory headwinds, according to a December 2017 panel at S&P Global Market Intelligence's European Multichannel Summit.

In 2016, European Competition Commissioner Margrethe Vestager blocked CK Hutchison Holdings Ltd.'s attempt to buy Telefónica SA's British mobile arm, O2, citing antitrust concerns. A year earlier she vetoed plans for Nordic operators Telenor ASA and Telia Co. AB, then known as TeliaSonera, to merge their mobile operations in Denmark.

Looking at specific deals, the largest private equity transaction of the first half was the takeover of Danish telecom company TDC A/S, which accepted a premium offer from Macquarie's infrastructure fund, alongside three Danish pension funds, at an implied total transaction value of €8.40 billion.

Another investor pursuing headline deals in the sector is New York-based fund manager, KKR & Co. That firm agreed to acquire 49.99% of the equity in SFR TowerCo, which is managed by Altice's French subsidiary SFR. KKR reportedly outbid Blackstone Group LP and a consortium led by Allianz Group and AXA SA.

The transaction — KKR's second telecom investment in two years after acquiring up to 40% in Madrid-based telecom infrastructure provider Telxius from Telefonica last year — is part of a wider sale by Altice of its tower businesses in France and Portugal for a total cash consideration of €2.5 billion.

Approximately 75% of the Portuguese assets went to a consortium including Morgan Stanley Infrastructure Partners and Horizon Equity Partners.

And although the proposed acquisition of Daisy Group PLC failed to transpire this year, despite reportedly attracting private equity buyers such as CVC Capital Partners, infrastructure investors successfully pursued a number of other U.K. telecom businesses in line with the regional trend.

For instance, a Goldman Sachs Group Inc.-backed consortium consisting of a number of infrastructure funds in 2018 acquired British fiber broadband company CityFibre Infrastructure Holdings PLC for a total transaction value of €840 million.

Meanwhile, TalkTalk Telecom Group PLC formed a fiber broadband joint venture with infrastructure investor, Infracapital. Separately, Infracapital also purchased a 25.4% stake in rural broadband provider Gigaclear PLC.