Tele2 says Dutch business not viable before EU rules on Deutsche Telekom deal

FILE PHOTO - People walk by a Tele2 company's sales office in St. Petersburg, April 2, 2013. REUTERS/Alexander Demianchuk

BARCELONA/BRUSSELS (Reuters) - Sweden's Tele2 TEL2b.ST said on Thursday its Dutch subsidiary was not viable as a standalone business, lending weight to a takeover by Deutsche Telekom's DTEGn.DE business there that European regulators are due to rule on this month.

The Dutch combination hangs in the balance on concerns that a shift from four to three mobile operators would curb competition, enough to derail similar deals in the past.

But Deutsche Telekom declined to offer concessions to European Union regulators after arguing for the merits of the deal at a closed door hearing last month, meaning it could either be waved through or blocked on Nov. 30.

KPN KPN.AS dominates the Dutch market, with a 43 percent share at the end of 2017, followed by a Vodafone VOD.L joint venture with Liberty Global LBTYA.O, with 30.5 percent and Deutsche Telekom's T-Mobile Nederland with 21 percent.

Tele2’s share was far smaller. The Swedish-owned challenger only offers mobile and cannot compete with bigger players with ‘converged’ fixed-line and mobile services.

“It’s a not sustainable position,” Tele2 CEO Anders Nilsson told the Morgan Stanley European Technology, Media and Telecoms Conference in Barcelona.

“It’s lack of scale, basically. It’s an FMC (fixed-to-mobile converged) market where we don’t have FMC ability.”

Nilsson declined to say if he expects the deal, under which Tele2 would receive 190 million euros ($215 million) in cash and a 25 percent stake in the enlarged T-Mobile NL, to be approved.

Deutsche Telekom CEO Tim Hoettges told the conference that his team had made “a very aggressive pitch” to regulators. “We are challenging a duopoly,” he said.

Reporting by Douglas Busvine and Foo Yun Chee; Editing by Alexander Smith