* TeliaSonera, Telenor could not agree terms with EU
* Operators continue to review strategic options in Denmark
* Decision raises worries for approval of other mergers in
(Adds comments from EU Commission, consultant, background)
By Olof Swahnberg and Leila Abboud
STOCKHOLM/PARIS, Sept 11 TeliaSonera
and Telenor have abandoned their planned merger in
Denmark because of stiff opposition from European regulators,
raising concerns that larger mobile telecom deals pending in the
UK and Italy might also run into trouble.
The decision, announced by the two companies on Friday, is
the first time that regulators have scuppered such a deal since
European mobile network operators embarked on an acquisition
spree in early 2013.
The rejection also caused investors to worry that EU
Competition Commissioner Margrethe Vestager was taking a harder
line than predecessor Joaquin Almunia, who had approved similar
mobile consolidation deals in Austria, Ireland and Germany.
Vestager, who took office last November, said on Friday that
Teliasonera and Telenor had not done enough to allay her
concerns that reducing the number of mobile network operators in
Denmark would have damaged competition and risked higher prices
being charged to consumers.
"What we were looking at were very serious concerns. To me
it was necessary to have a fourth mobile operator," Vestager
told reporters on the sidelines of a conference.
However, she said there should be no conclusions drawn with
regard to the two merger deals in the UK and Italy, which would
also reduce the number of mobile network operators in those
markets to three from four and which Vestager will examine in
the coming months.
One distinction for the abortive Danish deal is that
Teliasonera and Telenor already shared a network in Denmark, so
had fewer options to divest parts of the network to a new player
to win over regulators, analysts said.
Nevertheless, competition lawyers said Vestager appeared to
be laying out a different framework for remedies to maintain
competition than her predecessor.
In Austria, Ireland and Germany the Commission had required
the merging companies to wholesale network capacity to rival
service providers known as mobile virtual network operators
But in Denmark Vestager indicated that she wanted the
creation of a new rival network owner, said Antonios Drossos, a
consultant at Rewheel, which has opposed past mobile
"I believe that the Commission will no longer accept MVNOs
as an effective remedy in a merger situation," he said.
Peter Alexiadis, a competition lawyer at Gibson, Dunn &
Crutcher, said Vestager's position on Denmark, which was her
first mobile merger case, was similar to the one she took
earlier this year on Orange's acquisition of Spanish
fixed-line broadband company Jazztel.
In that case the Commission forced Orange to sell off
Jazztel's fibre broadband network in five major cities and rent
out capacity nationwide so as to allow a new company to begin
offering broadband services while owning at least some of its
"What is clear from this case is that the Commission is now
looking for viable network-based entry," said Alexiadis.
"What is certain is that this will render the defence of
future mobile cases more difficult and the results will be more
prone to uncertainty."
Shares in Danish market leader TDC fell 6.5 percent
following Friday's news, while Telenor was down 1.5 percent,
TeliaSonera was off 0.8 percent and the Stoxx Europe 600
European telecoms sector index was down 2 percent.
Attention will now move to the UK where Hutchison Whampoa
has agreed to buy Telefonica's O2 UK for
10.25 billion pounds ($15.8 billion), a combination that would
make Hutchison's Three UK business the second-biggest of the
UK's three remaining network operators.
Vestager's team will examine that deal and the merger in
Italy of Hutchison's 3 Italia with Vimpelcom's Wind
Meanwhile, UK competition regulators are vetting a separate
$20 billion deal whereby the country's fixed line broadband
market leader BT is set to acquire the biggest mobile
network operator, EE, from Orange and Deutsche Telekom
John Strand, a consultant to Nordic telecoms companies said
there was now a risk that one of those deals would fall through.
"If you can't go from four to three operators in a tiny
market like Denmark, then why allow England and Italy, which are
much bigger, to consolidate?"
Simon Weedon, an analyst at Citigroup, put the chances that
Hutchison would complete its UK mobile deal at 50-50.
"I think Hutchison is prepared to do a lot in England to get
regulatory approval but the commission has set down a tough line
with the Denmark decision," he said.
A major sticking point for the Danish deal was that
Teliasonera and Telenor could not find a company willing to
provide the new competition that the regulators wanted.
The two companies had announced the deal last December,
saying the combination would boost margins and reap cost savings
in their toughest market.
Following objections from the regulators, the companies had
offered two sets of proposals to help create new competition,
according to European Commission documents seen by Reuters.
But TeliaSonera Chief Financial Officer Christian Luiga said
the operator could not concede any more as there would not have
remained enough economic value for them.
($1 = 0.6480 pounds)
(With additional reporting by Foo Yun Chee in Brussels and
Annabella Nielsen in Copenhagen; Editing by Greg Mahlich)