Exclusive: EU regulators set to clear Hutchison, O2 Ireland deal - sources

BRUSSELS Fri May 16, 2014 2:21pm EDT

The flag of Hutchison Whampoa Ltd., owned by Hong Kong tycoon Li Ka-shing, is being lowered to half-mast as a sign of respect for the victims of a fatal boat accident in Hong Kong October 2, 2012. REUTERS/Tyrone Siu

The flag of Hutchison Whampoa Ltd., owned by Hong Kong tycoon Li Ka-shing, is being lowered to half-mast as a sign of respect for the victims of a fatal boat accident in Hong Kong October 2, 2012.

Credit: Reuters/Tyrone Siu

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BRUSSELS (Reuters) - Hutchison Whampoa (0013.HK) is set to gain regulatory clearance for its $1 billion bid for Telefonica's (TEF.MC) Irish business as soon as it signs a separate deal aimed at creating a fourth mobile operator in Ireland, two people with knowledge of the matter said on Friday.

The Telefonica deal is one of three telecoms mergers being examined by the European Commission, the European Union's competition watchdog, that will reshape the industry.

Hong Kong-based conglomerate Hutchison, controlled by Asia's richest man, Li Ka-shing, wants to reinforce its position in Europe, where it operates in six countries. Buying Telefonica's O2 Ireland will make it the second biggest mobile operator in the country behind Vodafone (VOD.L).

Hutchison is in the final stage of talks to help Liberty Global's (LBTYA.O) Irish business, UPC, which currently offers Internet and cable TV services, become a mobile virtual network operator (MVNO) offering services over Hutchison's network.

"Now it is just putting together all the details," said one of the sources. The European Commission had demanded that Hutchison help create a fourth mobile player as the (Telefonica) deal would reduce the number of operators from four to three.

Hutchison will give up some of its capacity and sign a roaming agreement with UPC as part of the deal as the Irish business looks to become a standalone mobile operator in the future.

'STEP BY STEP'

"It's going to be step by step, helping UPC move from being an MVNO to become a mobile network operator," the source said.

The other major concession includes continuing a network sharing agreement with Ireland's third-biggest operator, eircom subsidiary Meteor.

European Commission spokesman for competition policy Antoine Colombani and Hutchison Whampoa spokesman Neil McMillan declined to comment. The Commission has set a June 20 deadline for its decision.

Hutchison secured EU approval for its Orange Austria takeover two years ago with similar concessions, but price increases since then have angered consumers and worried regulators.

The European Commission's decision on Hutchison's latest concessions could provide clues as to whether those offered by Telefonica in its bid to buy KPN's (KPN.AS) E-Plus operation in Germany will be sufficient, said telecoms lawyer David Cantor.

"It's been pretty clear that in the wake of the Austrian case, the Commission has little choice but to insist on the presence of a viable fourth national operator from day one," he said.

"Assuming this is the solution found in Ireland, it would be interesting to see if Telefonica's offer in Germany will be considered to achieve a similar result."

(Editing by Elaine Hardcastle and David Goodman)

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