German regulator wants merged Telefónica, E-Plus to cede spectrum

Germany's telecoms regulator wants Telefónica Deutschland and E-Plus to give up some of their spectrum assets if the European Commission approves a planned €8.6 billion ($11.9 billion) acquisition of KPN's German unit, as it fears the merged entity would otherwise have a competitive advantage.

In a planning report on its web site, the Bundesnetzagentur said the merged entity would have an advantage since it would be able to use spectrum in the 900 MHz, 1800 MHz and 2 GHz frequency bands for the "parallel deployment" of broadband technologies such as UMTS and LTE.

A company created from the merger of Telefónica Deutschland and E-Plus would have 63.8 per cent of the 1800 MHz spectrum, leaving Deutsche Telekom and Vodafone with 28.5 per cent and 7.7 per cent respectively.

"The procedure to make available frequencies in the 900/1800 MHz and others should be opened in the year 2014," the Bundesnetzagentur said in its report.

The Bundesnetzagentur also noted that it now plans to hold its next auction of frequencies in December this year, although a spokesman for the regulator told Reuters that the auction could be postponed until 2015 and could also be combined with the re-resale of licences for more 900 MHz and 1,800 MHz spectrum that are due to expire in 2016.

The agency is now seeking comments on the points it has raised in its planning paper by April 11.

The European Commission is currently reviewing the planned acquisition of E-Plus by Telefónica Deutschland and is expected to reach a decision by the deadline of May 14. The proposed merger is being closely watched by market players across Europe because of the implications it could have for other mergers and acquisitions (M&A) in the region. If the deal is approved by European regulators, it could spark what Orange CEO Stephane Richard has called an "M&A earthquake" in Europe.

The Commission is also investigating the planned €780 million acquisition of Telefónica's O2 business in Ireland by Hutchison Whampoa. 3 Ireland recently said it would establish a ready-made fourth mobile operator in the country if the Commission approves the deal.

For more:
- see the Bundesnetzagentur planning document (in German)
- see this Reuters article
- see this Bloomberg article

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