EU Rejects German Request to Review Telefonica-KPN Deal

Telefonica SA (TEF) and Royal KPN NV (KPN)’s proposal to combine their German assets will be reviewed by the European Union, the bloc’s antitrust chief said today, rejecting a bid by Germany to take over the regulatory analysis.

EU Competition Commissioner Joaquin Almunia’s comments in Florence, Italy, are a blow to German regulators concerned that Telefonica’s purchase of KPN’s E-Plus unit would reduce the number of mobile phone providers in the country from four to three.

The Telefonica acquisition, valued at 8.55 billion euros ($11.36 billion), is one of two deals that may transform the German telecommunications industry once dominated by Deutsche Telekom AG. (DTE) EU regulators are already examining Vodafone Group Plc (VOD)’s 7.7 billion-euro bid for Kabel Deutschland Holding AG. (KD8)

“This is very good news, it looks like this deal will go through,” Jos Versteeg, an Amsterdam-based analyst at Theodoor Gilissen Bankiers, said about the Telefonica-KPN deal.

Andreas Mundt, the head of the German Federal Cartel Office, said last month that the Telefonica deal only affects his country and should be reviewed by his office. E-Plus was also very active in price competition, he said.

Kay Weidner, a spokesman for the Cartel Office, referred to Mundt’s August statement and declined to comment further.

Photographer: Angel Navarrete/Bloomberg

Traffic passes outside Telefonica SA's headquarters in Madrid. The Telefonica acquisition, valued at 8.55 billion euros ($11.36 billion), is one of two deals that may transform the German telecommunications industry once dominated by Deutsche Telekom AG. Close

Traffic passes outside Telefonica SA's headquarters in Madrid. The Telefonica... Read More

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Photographer: Angel Navarrete/Bloomberg

Traffic passes outside Telefonica SA's headquarters in Madrid. The Telefonica acquisition, valued at 8.55 billion euros ($11.36 billion), is one of two deals that may transform the German telecommunications industry once dominated by Deutsche Telekom AG.

“We took notice of” the commission’s intention to review the E-Plus transaction, Ward Snijders, a spokesman for KPN in The Hague, said by phone. “This is in line with the process started after the E-Plus sale was announced.”

Telefonica Deutschland (O2D) spokesman Albert Fetsch couldn’t immediately be reached for comment.

National Factors

Industry competition is still contained within national borders and EU antitrust regulators will continue to examine telecommunications deals based on their impact on national markets rather than the whole EU “at least for some time,” Almunia said today.

While the commission adopted a plan to overhaul the EU telecommunications industry earlier this week, Almunia said “we do not expect market structures to change from one day to the next.”

Under the plan, consumers in the EU would no longer have to pay premiums to receive calls while traveling in the 28-nation bloc as of mid-2014. Providers could choose to offer phone plans that apply everywhere in the region or let customers opt for a separate roaming provider without having to buy a new SIM card.

To contact the reporters on this story: Gaspard Sebag in Florence at gsebag@bloomberg.net; Stephanie Bodoni in Florence at sbodoni@bloomberg.net.

To contact the editor responsible for this story: Anthony Aarons at aaarons@bloomberg.net

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