Telefónica continues to court Liberty Global as part of E-Plus bid

Telefónica is still courting international cable company Liberty Global as a potential fourth mobile operator for Germany in a bid to win approval for its proposed €8.5 billion ($11.5 billion) acquisition of local rival E-Plus, despite reports Liberty does not wish to operate its own network in the country.

The Spanish incumbent is in talks with Liberty Global's German business Unitymedia, and telecoms companies Freenet and Drillisch, regarding opening access to its wireless network, Bloomberg reported. The deal would allow the operators to use Telefonica's infrastructure before deploying their own networks for billing and backbone data transmission, the news site added, citing sources with knowledge of the negotiations.

If the report is accurate, the move would be something of an about-turn for Liberty Global, which last month said it is not interested in becoming Germany's fourth mobile operator in the event the E-Plus deal is approved.

At the time, the German edition of the Wall Street Journal reported that Unitymedia CEO, Lutz Schüler, believed constructing its own network would be unprofitable, however, he did not rule out partnerships with telecoms companies as part of plans to increase investment in mobile services.

Telefónica is reportedly offering the concession as it seeks to ease European Commission competition regulators' concerns about the E-Plus deal, which would reduce the number of mobile operators in Germany from four to three.

The European Commission last week signalled it is willing to consider clearing mergers and acquisitions with concessions to allow new players to enter the market, when it approved the acquisition of Telefónica Ireland by Hutchison Whampoa-owned H3G.

H3G committed to allow two MVNOs to enter the Irish market by using up to 30 per cent of the merged company's network capacity, to address concerns over the acquisition which, like Germany, will see the number of network operators fall from four to three.

The company also offered the option for one of the MVNOs to become a full network operator by acquiring spectrum at a later stage.

Ironically, Liberty Global's name was also linked to one of the Irish MVNO slots, via its UPC business.

For more:
- see this Bloomberg report
- see this Wall Street Journal Deutschland article (in German)

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