Telenor and TeliaSonera said they were confident that a planned merger of their respective Danish mobile network operations would be approved during 2015 after the European Commission (EC) opened an in-depth investigation into the proposed deal.
The two operators, which said in December 2014 that they planned to form a 50:50 joint venture in Denmark by combining their current mobile operations in the market, noted that the decision by the Commission to deepen its probe had been expected, "given the precedent from other transactions within the European mobile industry in recent years."
The EC indicated that it wanted to explore the situation further due to concerns that the merged entity would face insufficient competitive constraint from the two remaining players. "This could lead to higher prices and less innovation," the Commission observed. The EC now has until Sept. 2 to make its decision after the original Aug. 19 deadline was extended by 10 working days.
The proposed transaction would combine the number two and number three operators in the mobile retail market, and would reduce the number of mobile network operators (MNOs) in Denmark from four to three. "It would create the largest player both in terms of revenue and number of subscribers, followed by a similar-sized TDC and smaller player Hi3G [Three Denmark]," the Commission observed.
Telenor and TeliaSonera reiterated their belief that the merger is a necessary step "to enable us to free up resources, increase investments and be active in the competition to the benefit of consumers and businesses." The two operators said they would continue to hold a "constructive dialogue" with the Commission in the coming months.
When the merger was first announced, analysts described it as a "credible strategic solution" to TDC's domination of the market, but said close regulatory scrutiny was likely due to a potential marginalisation of Three Denmark.
Jefferies analysts noted at the time that Telenor and TeliaSonera had "long grappled with their sub-scale positions in the Danish market" and their lack of ability "to break TDC's dominance".
Approval of the deal seems likely given recent EC decisions, including the approval of Hutchison Whampoa's acquisition of O2 Ireland and the merger of Germany's E-Plus with Telefónica Germany. However, it remains to be seen what concessions the EU anti-trust officials will require to secure approval. In other markets such as Ireland, Germany and Austria, operators have been required to allocate some of their network capacity to new mobile network virtual operators (MVNOs), for example.
Margrethe Vestager, the Commissioner in charge of competition policy, said her aim is to make sure that the proposed transaction will not lead to higher prices for Danish consumers and businesses.
Vestager recently hinted that future mergers and acquisitions that reduce the number of network operators in individual member states could face tougher scrutiny, after initial evidence from markets where consolidation has been allowed showed consumer prices are rising.
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