EU OKs Telefónica's Takeover of E-Plus

BRUSSELS--European Union antitrust authorities waved through Telefónica SA's EUR8.6 billion ($11.7 billion) takeover of German mobile operator E-Plus on Wednesday, after a lengthy review marked by political pressure and an unprecedented revolt by national regulators.

However the EU's antitrust authorities placed several conditions on the merger approval, including ordering Telefónica to sell up to 30% of its network capacity to up to three rivals.

The merger is seen by investors as a test case for how EU authorities will treat further deals in Europe's rapidly consolidating telecoms sector. It will reduce the number of mobile operators in Europe's most populous nation from four to three, a move that EU antitrust chief Joaquín Almunia had previously warned could lead to higher prices for consumers.

The European Commission, which acts as the region's central antitrust authority, gave the green light after Telefónica made a series of commitments aimed at supporting competition, including a promise to sell up to 30% of the combined company's spectrum to up to three so-called mobile virtual network operators. These operators provide mobile phone services using another company's network.

Those commitments ensure that the acquisition won't harm consumers, EU antitrust chief Joaquín Almunia said in a statement.

The EU's approval is likely to spark further consolidation in the region's fragmented telecoms sector, where larger operators are seeking to swallow smaller rivals to bolster falling revenues, analysts said.

"This is a game-changer," said Mario Mariniello, an economist at think tank Bruegel in Brussels.

The commission's blessing on the deal "sets a precedent" for how EU authorities will look at similar mergers in other large countries, Mr. Mariniello said. The commission had previously approved four-to-three mobile-phone operator mergers in Austria and, most recently, Ireland, but not in a big EU country.

The European Commission came under an unusual degree of political pressure during the review, including calls from German Chancellor Angela Merkel and likely future commission president Jean-Claude Juncker for restrictions on European telecom mergers to be eased.

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