Cartel court OKs Telekom Austria takeover of Yesss
VIENNA (Reuters) - Telekom Austria (TELA.VI) got the go-ahead to buy Orange Austria's FTE.PA discount mobile brand Yesss, paving the way for a long-awaited consolidation of Austria's telecoms market.
The Yesss deal hinges on a 1.3 billion euro ($1.7 billion) agreement for Hutchison Whampoa (0013.HK) to buy Orange Austria, which was signed in February and is likely to be approved soon by the European Commission after a prolonged investigation.
Austria's cartel court said on Tuesday it had unconditionally approved the Yesss deal. It could still be challenged by the Austrian competition regulator, the BWB, within four weeks.
Hutchison 3G (3) said it now expected the European Commission to approve its takeover of Orange Austria, which is seen as a test case for consolidation elsewhere in Europe. The commission has until Dec 21 to make up its mind.
Telekom Austria, which slashed its dividend in September to ward off a cash crunch, will pay 390 million euros for Yesss, a high price for the 740,000 mobile customers it will gain, but one it judged worth paying to help consolidation.
Shares in the company fell 2.07 percent to 5.16 euros by 0803 EDT, underperforming a 0.59 percent weaker European telecoms index .SXKP.
"The cash and the leverage situation are more serious for Telekom Austria than market repair," said Andrew Hogley, telecoms analyst at Espirito Santo.
"The damage has been done in the Austrian market and even with consolidation EBITDA is going to fall a long way next year," he said. "If the deal had been blocked you could also have argued it was a small positive."
The Austrian cartel court said it was not concerned that the deal would raise Telekom Austria's market share to 47 percent from 45 percent now.
"Telekom would still not be considered market dominant after the merger, because it would not currently obtain a pre-eminent market position in this highly competitive market," it said.
Austria is seen as a test case for other European countries where investment bankers and operators are also hoping for a reduction from four to three carriers to ease price competition, including Italy, Spain and Denmark.
The Commission briefed national competition regulators on the Hutchison-Orange deal on Tuesday, in a sign that it had decided to approve it.
Austria has Europe's cheapest all-inclusive mobile deals, starting at 7 euros a month with no strings attached, and its four operators fight over a population of just 8 million, one-tenth of that of Germany, which has the same number of carriers.
The Commission's decision to carry out an in-depth investigation of the planned merger of the country's two smallest operators raised eyebrows, and is widely believed to have been motivated by concerns it would be seen as a precedent.
Even combined, Hutchison and Orange would have only 24 percent of the market, behind Telekom Austria, and T-Mobile (DTEGn.DE) with about 30 percent.
While Austria differs from its neighbors because of its small size and highly competitive prices, implications for other European markets should not be ruled out, telecoms analysts at BNP Exane Paribas wrote in a note last week.
"We believe that politicians in Europe, both at the EU and at the national levels, have increasingly come to the conclusion that Europe needs more investment in telecom networks, both fixed (fiber) and mobile (4G) - or it risks seriously lagging other regions in the world in terms of super-fast broadband, particularly compared to the US," they wrote a note last week.
"The green light for some limited in-market consolidation deals could create a better environment for operators to accelerate investment."
(Additional reporting by Michael Shields; Editing by Hans-Juergen Peters)