* Germany to go from 4 to 3 mobile network operators
* Telefonica must sell spectrum, rent out network capacity
* Approval seen encouraging further mobile consolidation
* KPN stock up as much as 4 pct, Telefonica Germany up 2 pct
(Adds Almunia, analyst comments, share price reaction)
By Robert-Jan Bartunek
BRUSSELS, July 2 Spain's Telefonica won EU
antitrust clearance for its 8.6-billion-euro ($12 billion)
takeover of KPN's German mobile arm E-Plus, giving it a stronger
position in Europe's largest phone market.
The ruling by the European Union's powerful antitrust chief
Joaquin Almunia sends an encouraging signal to the region's
mobile operators, who have lobbied for lighter regulation of
mergers to allow them to bulk up after years of falling revenue.
Combining the German businesses of KPN and
Telefonica will create the country's largest mobile
operator by customers with a market share of roughly 31 percent,
giving the Spanish firm more clout in its battle with Vodafone
and Deutsche Telekom's T-Mobile.
KPN's shares jumped as much as 4.2 percent after the
decision was announced, while Telefonica's shares were slightly
lower. Shares in Telefonica's unit O2 Deutschland rose
as much as 3 percent.
As the takeover will cut the number of German mobile network
operators from four to three, the Commission insisted that the
Spanish group rent out up to 30 percent of the merged company's
network capacity and divest some radio wave spectrum.
Telefonica will also extend existing wholesale agreements
and offer fast 4G mobile broadband internet to any company that
wants to offer such services.
The Commission said these measures would allow for up to
three new "virtual" operators - which do not have their own
networks so pay others to carry their traffic - to enter the
German market. Such players are already strong in Germany, where
they sell cheaper plans often aimed at young people or immigrant
Telefonica has already signed a deal with virtual operator
"The remedies to which Telefonica commits ensure that the
acquisition of E-Plus will not harm competition in the German
telecoms markets," European Competition Commissioner Joaquin
Almunia said in a statement.
Almunia's aim was to ensure that consumers in Germany - who
already pay among the highest mobile prices in Europe - do not
face rising costs after the merger.
All major deals need the approval of the European
Commission, which acts as a competition watchdog in the
PROFIT MARGIN SQUEEZE
Facing demands to invest in faster mobile and fixed
networks, European telecoms groups are turning increasingly to
consolidation as a way to gain scale and return to growth.
Vodafone has been buying up fixed broadband companies in Germany
and Spain, while operators in France and Spain are also weighing
whether to make bids for smaller mobile rivals.
Europe has more than 100 mobile network operators, compared
to just four major operators in the United States, something
that the European industry has argued leads to destructive price
wars and poorer-quality services.
Almunia said barriers had to be removed to make the European
telecoms market stronger, referring to reforms pushed by
Brussels to end roaming fees and foster cross-border services.
"These barriers are also what sets Europe apart from
countries such as the United States and China. It's not about
the number of operators. It's about the fragmentation of the EU
market," he said.
($1 = 0.7331 Euros)
(Reporting by Robert-Jan Bartunek and Foo Yun Chee; additional
reporting by Hannah Boland, Leila Abboud in Paris and Harro Ten
Wolde in Frankfurt; editing by Tom Pfeiffer)