MERGERS : INVESTIGATION INTO TELEFONICA DEUTSCHLAND-E-PLUS DEAL.

As expected, on 20 December the European Commission opened an in-depth investigation into Telefonica Deutschland's acquisition of E-Plus, the German subsidiary of the mobile network operator KPN. The EU executive has concerns over this 8.6 billion transaction, announced in July, particularly that the proposed merger will reduce competition on the markets for retail mobile telephony, as well as for wholesale access and call origination in Germany - for which Telefonica and E-Plus are currently competing. "The transaction would combine two of the four mobile networks in Germany and create a player of similar size to the currently two largest operators, Deutsche Telekom and Vodafone," says the Commission. This would remove an important competitive force, says the executive, and change the merged entity's incentive to exert significant competitive pressure on the remaining competitors.

Moreover, the Commission has concerns that after the transaction, the remaining mobile network operators (MNOs) might have fewer incentives to grant access to their network to mobile virtual network operators (MVNOs) and service providers. Prospective and existing MVNOs and service providers would have less choice of host networks, and hence weaker negotiating power to obtain favourable...

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