EU set to open probe into Hutchison-Telefonica deal: sources

BRUSSELS Wed Oct 23, 2013 11:07am EDT

The logo of Hutchison Whampoa Ltd is displayed at one of the company's office towers in Hong Kong August 1, 2013. REUTERS/Bobby Yip

The logo of Hutchison Whampoa Ltd is displayed at one of the company's office towers in Hong Kong August 1, 2013.

Credit: Reuters/Bobby Yip

BRUSSELS (Reuters) - Hutchison Whampoa's $1 billion bid for Telefonica's Irish unit is likely to face a lengthy EU antitrust investigation unless Hutchison offers concessions to allay competition concerns, two people familiar with the matter said on Wednesday.

Hong Kong-based Hutchison Whampoa, controlled by Asia's richest man, Li Ka Shing, announced the 780-million-euro ($1.07 billion) offer for Telefonica's 02 Ireland unit in June as part of a drive to expand its presence in Europe.

The acquisition would quadruple the market share of Hutchison's subsidiary, 3 Ireland, to 37.5 percent, behind market leader Vodafone.

The European Commission, which is now conducting a preliminary review of the deal, expressed concerns to Hutchison officials at a "state-of-play" meeting on Tuesday, the sources said, declining to provide details.

The biggest regulatory worry is likely to be a reduction of competition in Ireland, as the deal will cut the number of mobile phone operators from four to three - an issue Hutchison ran into during its takeover of Orange Austria last year.

Hutchison said such meetings were part of the regulatory process. "We will be waiting to see what the Commission will say at the end of the Phase 1 review," a Hutchison spokesman said.

Hutchison has until November 6 to offer concessions. Failure to do so will trigger an in-depth investigation that could take up to five months.

Regulators typically ask telecoms operators to relinquish some frequencies or make it easier for rivals to gain access to their networks to ease competition concerns.

The Commission's spokesman for competition policy, Antoine Colombani, declined to comment.

(Reporting by Foo Yun Chee; editing by Barbara Lewis and Kevin Liffey)

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