The European Commission has opened an in-depth investigation into Vodafone’s proposed acquisition of Liberty Global’s business in Germany, the Czech Republic, Hungary and Romania, citing competition fears.
The EC said that its initial market investigation raised concerns that the takeover may reduce competition in: Germany, where Vodafone and Liberty Global operate non-overlapping coaxial cable networks; and the Czech Republic, where Vodafone is mainly active as a mobile operator and Liberty as a fixed telecoms provider.
Liberty’s German subsidiary, Unitymedia, currently competes against Vodafone in the TV and fixed telecoms markets and the EC said that the deal may limit the merged entity’s incentives to compete effectively with the remaining operators.
The commission said the German entity could also have increased bargaining power with TV broadcasters, which may negatively impact their ability to invest and stay competitive.
In the Czech republic, the EC’s concerns are that Vodafone and Liberty could offer converged products that shut out standalone providers across the mobile, internet and TV services markets.
“It’s important that all EU consumers have access to affordable and good quality telephone and TV services,” said European Commissioner, Margrethe Vestager.
“Our in-depth investigation aims to ensure that Vodafone’s acquisition of Liberty Global’s telecommunications businesses in Czechia, Germany, Hungary and Romania will not lead to higher prices, less choice and reduced innovation in telecoms and TV services for consumers.”
Liberty Global CEO Mike Fries said in a statement that he welcomed and expected the news from the EC. Liberty Global claims that the transaction “remains on track for approval by mid-2019.”
“We always anticipated a second phase review given the size and scope of the transaction, and it is clear that the EU is retaining regulatory authority over the case,” said Fries.
“This provides us with the appropriate forum to demonstrate the consumer benefits that will be delivered by the creation of fully converged, fixed-mobile operators in these four markets.”
Last month German alternative broadband operators association the Bundesverband Breitbandkommunikation (BREKO) called for the EC to say no to Vodafone’s acquisition of Unitymedia on the grounds that it would severely restrict competition in the broadband market.
A day later the German competition watchdog the Bundeskartellamt, together with the country’s Federal Ministry of Economic Affairs and Energy, requested the EC refer Vodafone’s acquisition of Liberty Global’s Unitymedia unit to it on the grounds that the deal has an impact on markets in Germany.
The EC said yesterday that the German Competition Authority’s referral request is “pending”. The Commission has until 2 May 2019 to make a decision on this and said that its opening of an in-depth investigation does not prejudge the outcome of that investigation.
Vodafone agreed to acquire Liberty Global’s operations in Germany, the Czech Republic, Hungary and Romania in May for an enterprise value of €18.4 billion.
The agreement will see Vodafone takeover Liberty Global’s Unitymedia cable network in Germany and the fixed line and TV assets it runs under the UPC brand-name in the Czech Republic, Hungary and Romania.
Since it was announced, the deal has been challenged by local rivals in Germany. In May, Deutsche Telekom CEO Timotheus Höttges cited the danger of “re-monopolisation” in the German market and said that the combined Vodafone-Unitymedia would connect 70% of TV customers.
Meanwhile, at ANGA COM in June, senior executives from Vodafone Deutschland and Deutsche Telekom clashed over whether Vodafone’s acquisition of Unitymedia would have an anti-competitive impact in Germany.
Liberty’s Fries has argued that sale of its German unit to Vodafone is “an incredibly positive transaction for consumers and for competition,” and that Vodafone and Liberty Global would still be “half the size of Deutsche Telekom”.