Germany Opens Airwave Review on Telefonica-KPN Wireless Merger
By Karin Matussek - Aug 5, 2013 11:03 AM GMT+0200 (Bloomberg)
Telefonica SA (TEF) and Royal KPN NV (KPN), which have proposed to merge their German mobile-phone assets, could be forced to give up some wireless frequencies, according to the country’s telecommunications regulator.
The airwaves for carrying signals based on GSM and UMTS standards were granted under the condition that their users remain independent, Iris Henseler-Unger, vice president of the Federal Network Agency, wrote in a letter to Thorsten Dirks, chief executive officer of KPN’s E-Plus unit, and his counterpart at Telefonica Deutschland Holding AG (O2D), Rene Schuster, after a conference call on July 23.
O2 and E-Plus together would have a customer base of more than 43 million as of March 31, surpassing Vodafone Group Plc’s 32.4 million and Deutsche Telekom AG’s 37 million, according to data compiled by Bloomberg Industries.
“As a rule, the Federal Network Agency must guard the competitive independence of owners of frequency rights in an area of scarce resources,” Henseler-Unger wrote. “Ultimately, the Federal Network Agency can enforce this by withdrawing the frequency assignment.”
By agreeing to combine their German wireless assets in the 8.1 billion-euro ($10.8 billion) deal, Telefonica and KPN are laying down a challenge for European regulators, which in the past have blocked some telecommunications mergers or have required concessions that reduced projected cost savings.
The O2/E-Plus transaction, which the companies plan to complete in mid-2014, will result in cost savings and revenue synergies of 5 billion euros to 5.5 billion euros, the carriers said last month.
Two Weeks
The Bonn-based telecommunications regulator will examine the proposal and has asked the companies to provide information within two weeks, according to the letter dated July 25. The agency will have to review whether the frequencies will still be “efficiently used” and whether the combination would hamper competition, Henseler-Unger wrote. The agency also plans to seek comments from competitors, she said.
O2 and E-Plus together would have a customer base of more than 43 million as of March 31, surpassing Vodafone Group Plc (VOD)’s 32.4 million and Deutsche Telekom AG (DTE)’s 37 million, according to data compiled by Bloomberg Industries. Counting wireless-service revenue, E-Plus/O2 remained smaller than Vodafone and T-Mobile.
Telefonica and KPN also have to file for separate antitrust approval for the merger. Both the European Commission and the German Federal Cartel Office would be interested in reviewing a potential merger of O2 and E-Plus, a person familiar with the matter said last year. Germany’s antitrust regulator won’t in principle rule out a reduction in market participants, another person said at the time, when KPN and Telefonica were holding talks about a merger of the assets.
Germany’s Frankfurter Allgemeine Zeitung reported the letter earlier today.
-- Editors: Kenneth Wong, Ville Heiskanen