Following an in-depth investigation, the European Commission (EC) has approved Telefonica Deutschland’s EUR8.55 billion (USD11.9 billion) acquisition of Dutch telecom operator KPN’s German mobile unit E-Plus, subject to the full implementation of a package of conditions submitted by Telefonica. The clearance of the deal raises the potential for further consolidation in European telecoms markets; the combination of Telefonica and E-Plus will reduce the number of German network operators from four to three, with the enlarged Telefonica becoming the market leader ahead of Telekom Deutschland and Vodafone Germany. Brussels had concerns that the merger, as initially notified, would have removed two close competitors and important competitive forces from the German mobile market and that it would have further weakened the position of mobile virtual network operators (MVNOs) and service providers to the detriment of consumers. To address these concerns, Telefonica submitted remedies ensuring that new competitors will enter the market and that the position of existing competitors is strengthened. The company’s commitments are based on three components:
• The first is aimed at ensuring the short-term entry or expansion of one or several MVNOs which will compete with the merged entity. Telefonica commits to sell, before the acquisition is completed, up to 30% of the merged company’s network capacity to up to three MVNOs in Germany at fixed payments. The capacity is measured in terms of bandwidth and the MVNO entrants will obtain a dedicated ‘pipe’ from the combined entity’s network for voice and data traffic. With a fixed capacity that they committed to pay upfront at their disposal, the MVNOs will have increased incentives to fill the capacity they have committed to purchase by offering attractive prices and innovative services. This remedy ensures that up to three MVNOs will enter or expand in the German market with the necessary degree of certainty, ensuring a sufficient degree of competition to counteract the elimination of E-Plus.
• Second, Telefonica offers to divest spectrum and certain assets either to a new mobile network operator (MNO) entrant or subsequently to the MVNO who will have taken up the network capacity thanks to the first part of the commitments.
• Lastly, Telefonica commits to extend existing wholesale agreements with current partners and to offer wholesale 4G services to all interested players in the future. In addition, Telefonica commits to improve its wholesale partners’ ability to switch their customers from one MNO to another.
Joaquin Almunia, EC vice president in charge of competition policy, commented: ‘The remedies to which Telefonica commits ensure that the acquisition of E-Plus will not harm competition in the German telecoms markets. Consumers will continue to enjoy the benefits of a competitive market.’