Telefonica's acquisition of E-Plus gets green light from Europe's competition watchdog

Approval is contingent upon Telefonica selling up to 30 percent of its network capacity.

Headquarters of Telefonica, soon to be the new owner of E-Plus.
Headquarters of Telefonica, soon to be the new owner of E-Plus. Image: Telefonica

The European Union's antitrust commission has approved Telefonica's acquisition of KPN's German mobile subsidiary E-Plus, almost a year after the €8.6bn deal was announced.

However, to get EC approval, Telefonica had to agree to some fairly substantial stipulations. Primarily, to ensure that the German mobile marketplace remains competitive, Telefonica must sell up to 30 percent of the merged company's network capacity to one or more other mobile carriers. Likewise, it must divest mobile spectrum and other assets for other carriers to use as well.

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Additionally, Telefonica had to agree to extend both companies' current wholesale agreements as well as offer wholesale 4G services to other providers in the future.

According to Joaquín Almunia, the commission's vice president of competition policy, the stipulations will "ensure that the acquisition of E-Plus will not harm competition in the German telecoms markets. Consumers will continue to enjoy the benefits of a competitive market."

A regulatory dogpile

Announced last July , the takeover almost immediately began raising regulatory eyebrows, since it would have effectively folded E-Plus into Telefonica’s O2 Germany network — creating the country's largest mobile network and reducing the its mobile carrier marketplace from four main competitors to three.

Indeed, shortly after the deal was announced, Andreas Mundt, the president of the Bundeskartellamt (the country's anti-cartel regulator) expressed concern about its effects on competition in the mobile marketplace.

And then in September, the European Commission’s antitrust regulator announced that it would review the merger, which effectively pre-empted a review by the Bundeskartellamt. Not to be left out, Germany's Federal Network Agency jumped into the fray this April , noting that the merger would give the new network an 'asymmetric' distribution of broadband frequencies.

Whether Telefonica's concessions to the EU's competition commission will pass muster for the national regulators remains to be seen. However, because the company must sell some of its network capacity, it opens the door for at least one more main mobile operator to compete in Germany.

Currently, Deutsche Telekom's T-Mobile is Germany’s largest mobile operator, with Vodafone in second place.

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