approves Telefonica's takeover of KPN German unit
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[July 02, 2014]
By Robert-Jan Bartunek
BRUSSELS (Reuters) -
Spain's Telefonica won EU antitrust clearance for its
8.6-billion-euro ($12 billion) takeover of KPN's German
mobile arm E-Plus, giving it a stronger position in
Europe's largest phone market.
The ruling by the European Union's powerful antitrust chief Joaquin
Almunia sends an encouraging signal to the region's mobile
operators, who have lobbied for lighter regulation of mergers to
allow them to bulk up after years of falling revenue.
Combining the German businesses of KPN and Telefonica will create
the country's largest mobile operator by customers with a market
share of roughly 31 percent, giving the Spanish firm more clout in
its battle with Vodafone and Deutsche Telekom's T-Mobile.
KPN's shares jumped as much as 4.2 percent after the decision was
announced, while Telefonica's shares were slightly lower. Shares in
Telefonica's unit O2 Deutschland rose as much as 3 percent.
As the takeover will cut the number of German mobile network
operators from four to three, the Commission insisted that the
Spanish group rent out up to 30 percent of the merged company's
network capacity and divest some radio wave spectrum.
Telefonica will also extend existing wholesale agreements and offer
fast 4G mobile broadband internet to any company that wants to offer
The Commission said these measures would allow for up to three new
"virtual" operators - which do not have their own networks so pay
others to carry their traffic - to enter the German market. Such
players are already strong in Germany, where they sell cheaper plans
often aimed at young people or immigrant populations.
Telefonica has already signed a deal with virtual operator Drillisch.
"The remedies to which Telefonica commits ensure that the
acquisition of E-Plus will not harm competition in the German
telecoms markets," European Competition Commissioner Joaquin Almunia
said in a statement.
Almunia's aim was to ensure that consumers in Germany - who already
pay among the highest mobile prices in Europe - do not face rising
costs after the merger.
All major deals need the approval of the European Commission, which
acts as a competition watchdog in the 28-member bloc.
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PROFIT MARGIN SQUEEZE
Facing demands to invest in faster mobile and fixed networks,
European telecoms groups are turning increasingly to consolidation
as a way to gain scale and return to growth. Vodafone has been
buying up fixed broadband companies in Germany and Spain, while
operators in France and Spain are also weighing whether to make bids
for smaller mobile rivals.
Europe has more than 100 mobile network operators, compared to just
four major operators in the United States, something that the
European industry has argued leads to destructive price wars and
Almunia said barriers had to be removed to make the European
telecoms market stronger, referring to reforms pushed by Brussels to
end roaming fees and foster cross-border services.
"These barriers are also what sets Europe apart from countries such
as the United States and China. It's not about the number of
operators. It's about the fragmentation of the EU market," he said.
($1 = 0.7331 Euros)
(Reporting by Robert-Jan Bartunek and Foo Yun Chee; additional
reporting by Hannah Boland, Leila Abboud in Paris and Harro Ten
Wolde in Frankfurt; editing by Tom Pfeiffer)
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