Exclusive: Deutsche Telekom to win EU nod for Dutch Tele2 deal, shares jump

Technology

BRUSSELS (Reuters) – Deutsche Telekom will win unconditional EU antitrust approval to buy Tele2’s Dutch business, sources familiar with the matter said on Monday, sending telecoms shares higher on hopes of more flexible regulation on consolidation.

FILE PHOTO: A Deutsche Telekom logo at the Mobile World Congress in Barcelona, Spain, February 26, 2018. REUTERS/Yves Herman/File Photo

The European telecoms index spiked higher, with Tele2 shares jumping 9 percent for their best day in more than four months. Deutsche Telekom shares recovered from negative territory to a 1 percent gain.

The telecoms industry has long called on the European Commission to take a broader view of mergers aimed at boosting revenue and investment, as well as allowing it to compete better against internet rivals.

Pessimism reigned, however, after Competition Commissioner Margrethe Vestager scuppered a plan by Telia Company and Telenor to merge their businesses in Denmark in 2015.

A year later she blocked CK Hutchison Holdings’ plan to merge its Three UK subsidiary with Telefonica’s O2 UK and also demanded hefty concessions for waving through other mobile telecoms deals.

The Commission opened a full-scale investigation into the Deutsche Telekom bid five months ago, concerned that a deal reducing the Dutch market to three players from four would hurt competition and lead to price increases for consumers.

Deutsche Telekom has argued that the combined company would have only a 25 percent market share, way behind market leader KPN and No. 2 player VodafoneZiggo.

It said the merged third player would be able to challenge the two competitors in fixed-broadband prices in the Netherlands and also roll out a 5G network more quickly.

Under the deal, Tele2 will receive 190 million euros ($224 million) in cash and a 25 percent stake in the enlarged T-Mobile NL, the two companies said when the deal was announced last December.

Tele2 said in a statement on Monday it remains optimistic the Commission will approve the merger, “without conditions”, but has not yet received any decision.

The Commission, which is scheduled to rule on the deal by Nov. 30, and Deutsche Telekom declined to comment.

Telecoms consultant John Strand welcomed the prospective EU approval, saying its previous stance was flawed.

“Our research has revealed the folly of regulators rejecting ‘four-to-three’ mergers for reasons of competition and price only to find that their logic was wrong and that prices increased,” he said.

The EU green light could be a watershed for European telecoms and speed consolidation in Spain and the UK while boosting valuations for some companies, Bernstein analyst Dhananjay Mirchandani wrote in a client note.

Reporting by Foo Yun Chee, additional reporting by Doug Busvine in Frankfurt, Olof Swahnberg and Johan Sennero in Stockholm; Editing by David Goodman and Matthew Lewis

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