A flurry of transactions and rumours of deals involving European telecommunications companies has confirmed indications that the sector is fully back in play for dealmakers.

The move by Tele2,the Swedish-based, pan-European telecoms provider, on Versatel of the Netherlands, the country's largest alternative network provider, comes at the same time as France Telecom is understood to be considering a last-minute bid for Amena, the mobile arm of Spain's Auna.

The French incumbent sent a frisson of excitement through the markets recently when it announced it had lifted its self-imposed €500m ($602m) spending cap on any single acquisition.

In the UK there is renewed interest in privately-held Energis by Cable & Wireless, the UK's largest alternative network operator, which has run the rule over its rival at least once before.

The activity is the latest sign of a revival in the telecoms sector after four years in the doldrums.

Returning investor confidence has resulted in an initial burst of private equity deals mixed in with strategic M&A activity as telecom operators look to build their businesses in an industry dependent on scale for the best returns.

“Activity is definitely picking up with numerous smaller transactions on a bi-weekly, if not weekly, basis,” said one London-based telecoms analyst. “The big telecoms carriers, almost to a man, have completed the deleveraging that was necessary after the acquisition spree during the 1999 to 2001 period and are now sitting on top of a lot of cash.”

While there have been numerous deals among second and third-tier telecoms suppliers, on the whole the venture capitalists have led the way.

The largest deal in Europe so far was the €12bn acquisition of Italian telecommunications group Wind in April by a group led by Egyptian entrepeneur Naguib Sawiris. The deal also ranks as Europe's biggest leveraged buy-out.

Should France Telecom make a move for Auna's mobile arm it would find itself bidding against two teams of venture capitalists. The only confirmed trade bidder, Spain's Ono, wants Auna's cable assets to create a national cable operator.

But strategic buyers have already been active. Tele2, which started life as a telecoms reseller, has already made two smaller acquisitions of network operators, the start of a strategy of backwards integration into infrastructure in the markets where it has critical mass with the aim of boosting margins.

Elsewhere the strategic deals have been largely focused on mobile assets. Vodafone spent some $3.5bn on two eastern European deals in March, while last month KPN, the Dutch incumbent, bought Telfort, the rival domestic mobile operator, for just over €1.1bn.

And activity is expected to pick up even more.

“There is still a lot moreto do and I expect to seea lot more activity over thenext few years,” said PaulRees, head of the Europeantelecom practice at PwC. Judging by the relatively small amount of money spent so far, there is much more to come.

In a research notepublished at the startof this year, Merrill Lynch estimated that the large European telecoms operators, both fixed and mobile, could have as much as€85bn to spend on acquisitions over the next three years.

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