EU antitrust chief wary about market power of merging telcos

Europe's antitrust chief Joaquin Almunia, whose approval is required for Telefonica's two merger deals in Germany and Ireland, said today that he was wary about the growing market power of fewer but larger telecoms operators.

Mr Almunia's concerns came as Deutsche Telekom, Orange, Vodafone, Telecom Italia and other providers urged EU telecoms commissioner Neelie Kroes to help simplify merger rules and those related to spectrum sales.

The sector has pinned some of the blame for low investments in faster 4G and fibre broadband on tough EU merger rules which they say hinder the creation of large players which can plough money into such projects.

“The industry says it needs to consolidate to invest in the next-generation networks. However, allowing fewer, larger players in individual EU countries would just reinforce market power at that level,” Mr Almunia said in a speech during a visit to Cape Town, South Africa, which was released by his office.

He said any mergers between telecoms companies would be assessed in terms of the impact on domestic markets rather than on a pan-European scale because of the cross-border barriers in the 28-country European Union.

Mr Almunia will decide by May 19th whether to clear Hutchison Whampoa to acquire Telefonica's O2 Ireland subsidiary after the Hong Kong-based conglomerate offered concessions.

The commission has set a preliminary deadline of May 14th to decide on Telefonica’s bid for KPN’s E-Plus unit in Germany. This could be extended if the Spanish operator submits concessions.

In their letter to Ms Kroes, the telecoms companies said EU antitrust rules should evolve “to support market-driven restructuring” and that the sale of valuable spectrum by governments should be revamped.

Signatories of the letter included chief executives from Telefonica, Telekom Austria, Sweden's TeliaSonera , Russian company Vimpelcom and Hutchison Whampoa's deputy chairman.

Ms Kroes’ spokesman Ryan Heath said: “We agree on the need to complete the telecoms single market. There is widespread agreement on the damage caused by Europe’s fragmented markets.”

(reuters)