Telefonica’s E-Plus Bid Reviewed by EU in Turf War With Germany

Germany lost a turf war with the European Union over Telefonica Deutschland’s 8.55 billion ($11.6 billion) bid for a Royal KPN unit after the EU said it was “better placed” to rule on big telecommunications deals.

Telefonica’s plan to purchase KPN’s E-Plus will merge the two companies’ German units, reducing the country’s mobile operators from four to three. Germany asked last year to take over the merger review because the transaction would only affect the German market.

The deal, one of two to test regulators’ attitude toward consolidation in the industry, will remain with the European Commission, which formally rejected Germany’s request, according to an e-mailed statement today. The EU opened an in-depth probe into the transaction last month, citing concerns that it may harm retail customers and mobile virtual network operators that buy wholesale services from network owners.

“The commission concluded that it was better placed to deal with the case because of its experience in assessing mergers in the mobile telecommunications sector and the need for a consistent application of the merger control rules in the EU,” the regulator said in the statement.

While the EU usually examines transactions between companies with more than 5 billion euros in worldwide sales, it can transfer a review to a national antitrust authority if it decides that the deal significantly affects competition in that country.

The Bundeskartellamt, based in Bonn, Germany, didn’t immediately reply to an e-mail and a call seeking comment.

European Case

Joaquin Almunia, the EU’s antitrust chief, has repeatedly said the Brussels-based agency should keep the German deal, describing it is a “European case.”

He’s also examining Hutchison Whampoa Ltd.’s plan to buy Telefonica’s Irish unit, which will also merge two of the country’s operators. That deal may get a formal EU statement of objections as soon as this week listing concerns with how it will affect competition.

Liberty Global Plc, the company controlled by billionaire John Malone, will also seek EU approval to combine its UPC unit with Dutch broadband provider Ziggo NV, which will see it take on KPN’s Dutch cable business. Liberty Global will make a formal filing with the EU in February and “is confident that it will secure all relevant competition approvals as soon as possible,” it said in a statement earlier this week.

Almunia hasn’t been swayed by telecommunications firms’ calls to ease merger rules for them, saying national markets are “often highly concentrated with only a limited number of network operators” in each EU nation. New entrants have to overcome the limited availability of spectrum and the high cost of building a network, he said in a 2012 speech.

Hutchison won EU approval to buy wireless carrier Orange Austria, and merge it with its local unit, more than a year ago after it agreed to divest radio spectrum and offer network access to new rivals.

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