EU indicates support for Hutchison's Austria plan

VIENNA, July 31 Tue Jul 31, 2012 8:00am EDT

VIENNA, July 31 (Reuters) - The European Union is testing a proposal from Hutchison aimed at alleviating competition concerns about its planned takeover of Orange Austria, indicating broad support for the proposal, according to a document seen by Reuters.

The EU has moved to a phase-two, in-depth probe of the proposed 1.3 billion-euro ($1.6 billion) merger, which would combine the two smallest players in Austria's mobile market and reduce the number of network operators to three from four.

Hutchison 3G wants to buy Orange Austria to create a company with 22 percent market share in the country of 8 million, which would be better able to challenge market leader Telekom Austria and T-Mobile, a unit of Deutsche Telekom.

To allay the Commission's concerns, Hutchison 3G has proposed to help new players to enter the market as so-called mobile virtual network operators (MVNOs) which could rent space on Hutchison's network to resell to their own customers.

In an indication of support for the proposal, the Commission has already moved to a market test, asking mobile operators around Europe questions about MVNOs, including what market conditions are necessary for an MVNO to compete effectively.

According to a questionnaire seen by Reuters, the Commission has asked operators what effect the proposed merger would have on potential MVNO profit margins, and the extent to which MVNOs can create competition for network operators.

The Commission may spend about three weeks deciding whether the remedy is acceptable. It then has until Nov. 27 to publish its final decision on the takeover, although Hutchison is hoping for a much faster decision.

Hutchison's managing director said on Sunday there could be a decision in about three weeks.

Hutchison has already signed a deal with a potential MVNO, reported to be Liberty Global's UPC, a cable provider in the region, and a source familiar with the situation has said the Commission wants time to examine this deal.

MVNOs typically offer no-frills services catering for customers on a tight budget or with particular interests, such as migrants wanting to call home.

Austria now has two well-known budget brands: Yesss!, which is owned by Orange but which it plans to sell to Telekom Austria as part of the Hutchison-Orange merger, and bob, which is Telekom Austria's budget brand.