Deutsche Telekom skips EU concessions in Dutch Tele2 deal

8 November 2018 10:18am

30 October 2018. By Andrew Boyce.

Deutsche Telekom has skipped the chance to offer formal concessions to address EU concerns about its planned acquisition of Tele2’s Dutch business, MLex has learned.

The decision not to amend the deal means the European Commission must decide by Nov. 30 whether to approve the transaction as it stands, or block it outright.

Under EU merger rules and absent any “exceptional circumstances,” Deutsche Telekom had until Oct. 24 to propose a remedy offer to the commission, according to MLex calculations. The commission would then have circulated the offer among the parties’ rivals and customers for feedback.

The regulator hasn’t circulated any such offer, MLex understands. That means it either didn’t receive any proposal from the companies, or if it did the offer wasn’t considered strong enough to be worth sending around.

Deutsche Telekom plans to combine Tele2’s Dutch business with T-Mobile Netherlands, which it already owns, in a deal announced last December.

Magic numbers

The commission opened an in-depth investigation into the merger in June, voicing concerns that it would reduce the number of mobile network operators in the Netherlands from four to three.

Case handlers issued Deutsche Telekom and Tele2 with formal objections in September, and the companies appeared at a closed-door hearing in Brussels to argue their case earlier this month.

Deutsche Telekom argues that its transaction is different from other four-to-three mobile mergers that the commission has reviewed in recent years, and would in fact enhance competition in the Netherlands.

The combination would create a strong third competitor to KPN and VodafoneZiggo, which limit competition by offering mobile discounts in fixed-mobile bundles, Deutsche Telekom says.

Deutsche Telekom says the merger provides the commission with a “unique opportunity” to show it isn’t “fixated on a ‘magic number’ of four players in each market.”

Remedy deadline

Companies seeking EU deal approvals must submit a remedy proposal to the commission no more than 65 working days into a phase II probe.

Deutsche Telekom has received a 20-working-day extension in the review, so its deadline was pushed back to working day 85 — namely Oct. 24.

The commission will accept a remedy proposal submitted after the deadline “in exceptional circumstances” and if the deal partners have good reason to apply for an extension.

But there’s not a great deal of precedent for such a move. Mobile operators Telia and Telenor did obtain an extension in the review of their proposed merger in 1999.

In that case the “exceptional circumstances” were that, as state-owned companies, Telia and Telenor needed to get the concessions reviewed by both the Danish and Swedish parliaments.

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