The European Commission confirmed it has opened an in-depth investigation to assess whether Hutchison 3G UK (H3G)'s planned acquisition of Telefónica Ireland is in line with European Union merger rules.
It has been recently speculated that Hutchison Whampoa-owned H3G's €780-million ($1.05 billion) bid to buy O2 Ireland from Telefónica would likely face a lengthy EU antitrust investigation unless the Hong Kong group offered concessions by Nov. 6 to allay competition concerns.
The Commission said in a statement it has concerns that the transaction may reduce competition in the markets for retail mobile telephony and for wholesale access and call origination in Ireland. A decision on the deal is expected to be reached no later than March 24, 2014.
The merger of Telefónica Ireland with 3 Ireland would quadruple 3 Ireland's market share to 37.5 per cent, with 2 million customers, Hutchison said when the merger was announced in June. The two companies currently compete with Vodafone Ireland and Eircom's eMobile and Meteor units.
The Commission said the transaction "would remove an important competitive force and change the merged entity's incentive to exert significant competitive pressure on the remaining competitors".
Its other concerns include a possible reduction in the merged entity's incentive to continue a network sharing agreement with Eircom, which could hamper Eircom's competitiveness, while there are also fears that the transaction would lead to a significant reduction in the number of mobile network operators willing to host mobile virtual network operators (MVNOs).
The EU's probe into the merger will be watched with interest by the European mobile industry as both the Irish merger and Telefónica's planned acquisition of KPN-owned E-Plus in Germany are seen as benchmarks for future regulatory attitudes. Europe's large European operators, including Orange, Vodafone and Deutsche Telekom, have signaled the need for a more relaxed approach to M&A by national and EU regulators as they struggle to maintain revenue growth in a highly competitive and saturated market.
Telefónica has also recently announced plans to sell its unit in the Czech Republic to local group PPF for €2.5 billion.
For more:
- see this European Commission release
- see this Reuters article
- see this Bloomberg article
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