August 28, 2015 / 4:36 PM / 4 years ago

Exclusive - TeliaSonera, Telenor prepare new concessions on Denmark mobile deal: sources

PARIS/BRUSSELS (Reuters) - TeliaSonera and Telenor are preparing deeper concessions as they fight for regulatory approval to merge their Danish telecoms units, after an offer to sell mobile spectrum to a new player fell short, said two people close to the situation.

A woman walks past TeliaSonera's logo during the company's fourth quarter result presentation January 31, 2013 in this picture provided by Scanpix. REUTERS/Fredrik Sandberg/Scanpix

The deal is an important test case for the European Union’s Competition Commissioner Margrethe Vestager, since it is her first mobile deal review and could give hints on how she will approach similar deals pending in Britain and Italy.

The Swedish and Norwegian operators received negative feedback from European competition regulators in a meeting in Brussels this week on their initial proposals, submitted on Aug. 12, the sources said, while rivals including Hutchison Whampoa, whose majority-owned Danish unit Hi3G operates under the 3 brand, were also cool to the plan.

The companies are seeking to combined their Danish fixed and mobile businesses to take the highly competitive market to three players from four. They aim to create a stronger competitor to leader TDC and reap annual cost savings of more than 800 million Danish crowns ($121 million).

The EU antitrust authority opened an extensive investigation into the case in April, warning about the possibility of higher prices and less innovation after the deal.

Mobile consolidation has already happened in Germany, Austria and Ireland since 2013. Prices subsequently rose sharply in Austria, prompting criticism from some regulators and consumer advocates.

While the telecoms industry argues consolidation is vital to build scale and upgrade infrastructure, Vestager has stressed the need to protect consumers and ensure promised investment in networks actually occurs.

TeliaSonera and Telenor are expected to submit revised proposals in coming weeks. A final decision is expected by Oct. 7. Details of the new proposals were not clear, but a third person close to the situation said the companies could pledge to sell additional spectrum to 3, the smallest operator in Denmark.

Telenor and TeliaSonera declined to comment since talks with regulators were ongoing. A spokesman for the European competition regulator also declined to comment.

NEW PLAYER

The original proposals were laid out in a document seen by Reuters and dated Aug. 12.

TeliaSonera and Telenor had pledged to sell two blocks of 2100 megahertz spectrum to a new player, as well as rent out up to 15 percent of its network capacity to the new rival. They also promised to give the new player the option to buy more than 30 retail stores in Denmark.

Some said the two might find further concessions hard to agree.

John Strand, a consultant for telecoms companies in the Nordic region, said he didn’t think TeliaSonera and Telenor would find any companies eager to enter Denmark’s mobile market.

“The remedies proposed by Telenor and TeliaSonera will not work because no-one will invest in building a new operator in a market where average revenue per user is very low and contract periods are short,” Strand said.

“Regulators are too focused on the number of operators in national markets when Europe needs consolidation to create stronger companies more able to invest in faster networks.”

TDC holds about 37.6 percent mobile market share in terms of service revenue, TeliaSonera 20.7 percent, Telenor 21.7 percent, and Hutchison’s 3 brand 20 percent, according to Citigroup.

Telenor and TeliaSonera have already held talks with Sweden’s Tele2 and Denmark’s second-largest cable operator Strofa, said the sources.

Additional reporting by Olof Swahnberg in Stockholm and Camilla Knudsen in Oslo; Editing by David Holmes

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