Report: Telefónica faces long EC probe into E-Plus deal with KPN

Telefónica and KPN could face a much longer probe into their €8.55 billion ($11.73 billion) German deal than they may have anticipated, after reports suggested that the European Commission plans to reject Germany's request to oversee the planned merger of KPN's E-Plus with Telefónica Deutschland.

In November, Germany's competition authority, the Bundeskartellamt, said it was seeking the right to probe the deal that would see Telefónica and KPN merge their respective German units to create the largest operator by customers and provide a stronger rival to Vodafone Germany and Deutsche Telekom.

However, unnamed sources told Reuters the Commission will reject this request and open an in-depth probe into the deal next week.

The Telefónica Deutschland/E-Plus merger case was referred to the European Commission at the end of October, but the Bundeskartellamt said the merger "exclusively affects the German mobile communications markets" and should therefore be referred to the German competition authority.

"This case requires an in-depth examination of whether the merger between the two mobile network operators would lead to competition problems," said Andreas Mundt, president of the Bundeskartellamt, in November.

The European Union competition regulator had 35 working days from the time of Germany's challenge to decide whether to adopt the referral decision or deal with the case itself. The EU set a deadline of Dec. 20 to consider the request from the Bundeskartellamt to take over the case.

The Telefónica Deutschland/E-Plus merger is being closely watched by market players across Europe because of the implications it could have for other M&A in the region. If the deal is approved by German or European regulators, it could spark what Orange CEO Stephane Richard has called an "M&A earthquake" in Europe.

Europe's leading telecoms executives have been falling over themselves to call for more industry consolidation to counter falling prices in the market. The CEO of Danish operator TDC, Carsten Dilling, recently said the Nordic markets would benefit from mergers, while Deutsche Telekom CEO Rene Obermann also said the time is now right for European operators thinking of mergers and acquisitions to make their move.

For more:
- see this Reuters article

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