EU Commission to widen scope of Vodafone merger

The European Commission is preparing a stiff examination of the £176 billion sterling (€287 billion) VodafoneMannesmann merger, which is likely to consider the combined company's power in the entire EU market for mobile phones and Internet services.

This would mean widening the review beyond national markets to include the new company's "enlarged footprint" in the EU market, even where there are not many overlaps in the combined entity's business.

The Commission is also scrutinising Vodafone's divestment of Orange, the British mobile operator, to ensure that Vodafone does not simply strip the assets and hand over an empty shell.

The competition authorities in Brussels are examining the mobile market carefully, since technologies in the sector are converging and the market is changing quickly.

Mr Michael Tscherny, a spokesman for Mr Mario Monti, competition commissioner, said yesterday the EU had received commitments from Vodafone AirTouch in order to receive clearance for the deal.

The EU's competition watchdog has now set a new deadline of February 28th to decide whether to clear the deal or submit it to a detailed four-month investigation. Competition officials are keen to see the timing of any spin-off of Orange, since this will be important to address competition issues. They could also insist that Orange be put under the charge of a trustee until it could be sold, as a way of distancing it more quickly from its parent.

As for the issue of a wider official investigation, the Commission used similar arguments about the "enlarged footprint" of the combined company in its investigation of the unsuccessful TeliaTelenor merger between Scandinavian telecoms companies. As well as pushing the companies to divest assets where their businesses overlapped in Norway, Sweden and the Republic, the Commission made them agree to sell their cable TV operations to reduce their overall market power. The deal was then approved by the Commission, although it subsequently fell apart after disagreements between the companies.

Vodafone's deal with French utilities group Vivendi last Monday reflects the pace of change in the sector. Under the deal, Vodafone and Vivendi will set up a jointly controlled company to offer Internet services to their combined customer base of 70 million.