UPDATE 2-Vodafone, KPN slam EU's Almunia over Hutchison deal

Tue Oct 2, 2012 11:20am EDT

* EU doubts whether effective remedies can be found

* Wants rivals able to compete against merged UPS, TNT

By Foo Yun Chee and Leila Abboud

BRUSSELS, Oct 2 (Reuters) - Vodafone and KPN on Tuesday slammed EU antitrust regulators who are examining Hutchison 3G's bid for France Telecom's Orange Austria, saying their narrow focus could block mergers and investments in the sector.

Earlier on Tuesday, EU Competition Commissioner Joaquin Almunia questioned whether Hutchison could offer sufficient concessions to ease his concerns about the proposed takeover, raising the spectre of a veto.

Almunia's comments came a week after the European Commission sent Hutchison a list of its reservations regarding the deal, which would eliminate a fourth telecoms provider in Austria. He had expressed similar doubts about the deal last month.

"We have recently adopted a statement of objections in relation with this proposed merger. At this stage, the question remains whether effective remedies will be found," Almunia said in the text of a speech at a conference in Nicosia.

A Hutchison spokesman said the company had little scope for more concessions on top of a proposal to offer network access to rivals at cost price. He said Hutchison would continue talks with the Commission and was confident of a positive outcome.

Chief executives of Vodafone, KPN and Orange urged a regulatory re-think on consolidation, arguing that more mergers were needed in Europe to meet the need for investment in networks and spur economic activity in the region.

"The solution has to be found in scale and consolidation. Commissioner Almunia has complained that there are not enough cross-country deals - he needs to ask the question why," Vodafone CEO Vittorio Colao told the FT ETNO Summit in Brussels.

"We need to allow consolidation. We should not worry how many operators a single country has, we should be a bit more American," he added.

His comments were echoed by Dutch operator KPN's chief executive Eelco Blok.

"Today the regulatory environment is an obstacle to growth," Blok told the conference. "Scale is very important in the telco business. Consolidation or network sharing is an issue today, and this needs to change in Europe to be able to sustain competitiveness."

CHANGE NEEDED

The CEO of France Telecom-owned Orange, Stephane Richard, was equally critical of the Commission's hard line on mergers.

"The Austrian example is quite illustrative. There are four operators, and now there is a crazy foolish project to go from four to three operators and this causes a problem for the EU.

"We have a major problem with the way competition policy is seen in Europe," Richard said.

"Just recall that in China there are only three operators and that is not a small country compared with Austria. We need a deep, deep change in competition policy in Europe."

Telekom Austria and Deutsche Telekom's T-Mobile are the leading players in the Austrian mobile market, with Hutchison 3G - a unit of Hutchison Whampoa, controlled by Hong Kong billionaire Li Ka-shing - in third place and its takeover target Orange Austria in fourth.

Speaking to Reuters on the sidelines of the conference, European Telecoms Commissioner Neelie Kroes said a balance must be found between different objectives.

"Rules in competition have to be followed," the EU's telecoms chief said. "In general we have to be aware that it's quite important to have competition as well as strong companies and as well as opportunities for the future economy."

Kroes, who held the EU antitrust post prior to Almunia, has said in the past that having a few strong pan-European operators would not necessarily be bad for competition, and that protecting consumers was more than just ensuring a given number of operators in one country.

Almunia also said on Tuesday it was important that delivery services companies DHL and FedEx be able to compete against United Parcel Service if it combines with Dutch peer TNT Express as planned. The Commission is now examining the 5.2-billion-euro takeover bid.

"These companies offer a service that has a broad impact on our economy, especially for cross-border trade, so it is important that customers continue to have access to these services at competitive conditions," he said in his speech.

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