UPDATE 1-EU approves Vodafone's acquisition of Spain's Ono

Wed Jul 2, 2014 1:22pm EDT

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BRUSSELS, July 2 (Reuters) - The European Commission said on Wednesday it had approved Vodafone's 7.2 billion euro ($9.79 billion) acquisition of Spain's largest cable operator Ono without conditions.

Reuters, quoting people familiar with the matter, reported last week that Vodafone would gain unconditional EU approval for the deal, which is part of a wave of consolidation in the telecoms industry.

"The Commission ... concluded that the transaction would not significantly impede effective competition in Spain," the European Union's antitrust watchdog said in a statement.

The deal is the British firm's third acquisition of a European fixed-broadband asset in two years.

Telecoms providers say more mergers are necessary to offset falling revenue and to secure the funds to upgrade infrastructure for fast-speed broadband.

Buying Ono will enable Vodafone to compete better with Spanish market leader Telefonica. Vodafone's 25 percent share of the Spanish mobile market is expected to increase by almost two percentage points after the deal.

Both companies provide fixed and mobile telecommunications services in Spain.

But the European Commission said the two companies' activities were largely complementary. Ono's main business is in fixed telecoms, whereas Vodafone is mainly active in mobile telecoms.

The EU said Vodafone and ONO's activities overlapped in a number of markets in the fixed and mobile telecommunications markets in Spain.

"However, the Commission found that the impact of the transaction on these markets is likely to be limited as the combined entity would continue to face significant competition from other market players, such as the incumbent operator Telefónica, and other operators such as Orange and Jazztel," it said.

It said the deal also created a number of vertical and conglomerate relationships in the fixed and mobile telecommunication markets in Spain, particularly in providing bundled multiple play services.

However, the Commission said the merged company would not be able to shut out fixed or mobile operators from the markets for multiple play services, because there were alternative operators and because of rules on wholesale access for mobile and fixed services.

Telefonica on Wednesday won EU antitrust clearance for its 8.6-billion-euro takeover of KPN's German mobile arm, giving it a stronger position in Europe's largest phone market.

(Reporting by Adrian Croft; editing by Justyna Pawlak)