Telefonica's acquisition of E-Plus in Germany faces extra scrutiny from watchdog

The merged mobile network would have to give up some of its spectrum, the country's telecoms regulator says.

In a sign of just how contentious Telefonica's €8.6bn acquisition of E-Plus is becoming, yet another regulator has jumped into the fray.

This time, Germany’s telecoms regulator, the Federal Network Agency, has said that if the deal passes muster on the European level, the new network will still have to give up some of its spectrum, in order to foster competition.

In a series of documents posted on its website, the agency has said that the merger would give the new network an "asymmetric" distribution of prized mobile broadband frequencies, compared to the other main mobile networks, Deutsche Telekom and Vodafone.

Particularly, it would control over 60 percent of the country’s 1800MHz spectrum, as well as almost one-third of the country’s 900MHz spectrum.

As such, the agency suggested that the merged entity should give up some its control in both frequencies, to level the playing field. A frequency auction is planned for the end of this year; however, an agency spokesperson told Reuters that it could be moved back, presumably to accommodate the forfeited frequencies.

Since the merger — which would see E-Plus folded into Telefonica's O2 — is set to create what would be Germany’s third-largest mobile network, it still faces a host of other regulatory hurdles.

Last August, as the deal was making headway, the head of the country’s anti-cartel watchdog said that that it  would review the case . However, shortly afterward, Joaquín Almunia, the vice president of the European Commission for competition policy, said that the deal would be reviewed at the EU level, effectively pre-empting domestic review.

However, the anti-cartel office has continued to express a lack of confidence that the European Commission will be able to decide the on the merger in the country’s best interests, and in January filed an appeal to move the review back to Germany. "We have the tendency to be more critical of concentration in the mobile market,” an office spokesperson said in December.

Read more on the sale of E-Plus