The European Commission (EC) has launched an in-depth, phase II investigation into Telefonica Deutschland’s (O2) planned takeover of KPN’s German mobile unit E-Plus.
The commission explained it is concerned the €8.55bn (US$11.7bn) deal may reduce…
The European Commission (EC) has launched an in-depth, phase II investigation into Telefonica Deutschland’s (O2) planned takeover of KPN’s German mobile unit E-Plus.
The commission explained it is concerned the €8.55bn (US$11.7bn) deal may reduce competition in the German markets for retail mobile telephony and for wholesale access and call origination.
The EC also noted that the deal would combine two of Germany’s four mobile networks, creating an operator similar in size to the two largest players: Deutsche Telekom and Vodafone.
“The commission has concerns that the transaction would remove an important competitive force and change the merged entity’s incentive to exert significant competitive pressure on the remaining competitors.”
Germany’s Federal Cartel Office (FCO) had asked the EC for permission to review the deal itself, with president Andreas Mundt saying it would affect only the German market. The phase II comes after the EC extended its initial phase I investigation by 10 working days to allow itself more time to consider the FCO’s request.
In its statement today, the EC questioned whether the deal would leave other operators with fewer incentives to allow MVNOs and service providers to access their networks. MVNOs would have less choice of host networks and consequently weaker negotiating power to secure favourable wholesale access terms, the commission added.
The EC also noted that the deal could increase the chances of operators coordinating their competitive behaviour and increasing prices.
The commission has 90 working days – until 14 May 2014 – to decide whether these initial concerns are valid.
“The commission will in particular examine questions, such as how close competitors the parties are, the merged entity’s post-merger incentives to compete, the likely reaction of competitors and possible positive effects for consumers related, among others, to the rollout of 4G mobile networks.”
O2, owned by Spain’s Telefonica, agreed in August to pay €8.55bn for E-Plus. The shareholders of the target’s current owner, Dutch telco KPN, approved the deal in October.
O2 CEO Rene Schuster has told media he expects the deal to get regulatory approval by Q2 2014.
