The European Commission (EC) is expected to issue a statement of objections (SO) to Telefonica’s (O2’s) planned takeover of KPN’s German mobile unit E-Plus.
The agency, currently conducting an in-depth, phase II review of the proposed merger, will…
The European Commission (EC) is expected to issue a statement of objections (SO) to Telefonica’s (O2’s) planned takeover of KPN’s German mobile unit E-Plus.
The agency, currently conducting an in-depth, phase II review of the proposed merger, will issue the formal complaint setting out its objections shortly, news agencies reported citing unnamed sources familiar with the matter.
The document could be sent to the companies next week and will explain why the regulator intends to prohibit the transaction if no further remedies will be offered.
However, the issue of a statement of objections does not necessarily mean a deal will not receive clearance. Hong Kong-based Hutchison Whampoa’s takeover of Orange Austria was subject to such a document and was eventually approved in January 2013, although the process was very drawn out and significant remedies were required. The EC has also recently issued an SO to Hutchison’s planned €780m takeover of O2 Ireland.
The next crucial step in a phase II procedure following the SO is usually an oral hearing, during which third parties, such as the German Federal Cartel Office, also have a voice. The hearing takes place around two weeks after the statement of objections has been issued.
The companies will have an opportunity to offer improved remedies at a later stage in the process.
The proposed €8.55bn (US$11.7bn) merger comes at a time when the competitive landscape in Germany witnesses significant changes, most importantly following the takeover of KDG by Vodafone. The deal has created a second strong rival that can now offer landline, broadband and mobile services, just like incumbent Deutsche Telekom.
This might also change the assessment of the competitive situation a pure mobile player such as a merged O2/E-Plus would face.
Last December, the EC expressed concern that the E-Plus deal would remove an important competitive force and change the merged entity’s incentive to exert significant competitive pressure on the remaining competitors. The European Commission has until 14 May to take a final decision.
