Telefonica agrees network access deal with Drillisch

25 Jun 2014

Telefonica Deutschland has agreed to grant network access to mobile service provider Drillisch in a bid to secure approval for its planned EUR8.55 billion (USD11.9 billion) acquisition of KPN’s German unit E-Plus. Under the deal, Drillisch agreed to acquire 20% of the capacity of all mobile networks that will be under the control of Telefonica following the completion of the E-Plus takeover, in addition to the capacity necessary to provide services to its existing customers hosted on Telefonica or E-Plus’ networks. The 20% will be reached via a glide path mechanism over a period of five years. In addition, Drillisch shall have the right to acquire up to 10% additional capacity of those networks. Telefonica Deutschland will grant Drillisch, via a mobile bitstream access model, access to the future joint network, as well as to the existing and future technology developments on that network, which Drillisch may offer to its customers. The agreement is aimed at removing the European Commission’s (EC’s) concerns that a merger of Telefonica and E-Plus would have a negative impact on competition, and will only become effective if Brussels conditionally clears the acquisition and confirms it complies with the conditions and obligations possibly attached to the approval of the proposed transaction.

Netherlands-based KPN agreed to sell E-Plus to Telefonica in July 2013 and in December the EC opened an in-depth investigation into the transaction, TeleGeography’s GlobalComms Database notes. If approved, the combination of Telefonica and E-Plus would reduce the number of network operators from four to three, with the enlarged Telefonica becoming the market leader ahead of Telekom Deutschland and Vodafone Germany. Late last month the EC extended the deadline for its decision on the deal by a further five working days to 10 July.

Germany, 1&1 Drillisch, E-Plus Group, KPN, Telefonica, Telefonica Deutschland Holding