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Hutchison Wins EU Approval For $1 Billion O2 Ireland Deal

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Hong Kong-based Hutchison Whampoa gained European Union regulatory approval on Wednesday for its $1 billion bid for Telefonica's Irish business in a case that could set the tone for Telefonica's bigger German deal.

Approval of the Hutchison takeover and Telefonica's bid for Germany's E-Plus could trigger further consolidation in a sector struggling with its fifth year of declining revenue and the need to upgrade networks for high-speed broadband.

Hutchison, controlled by Asia's richest man, Li Ka-shing, is strengthening its position in Europe, where it operates in six countries. It already has the fourth-largest mobile network in Ireland and is now adding No.2 operator O2 Ireland, though it will remain behind market leader Vodafone.

The European Commission said Hutchison will have to sell up to 30 percent of the merged company's network capacity to two mobile virtual network operators (MVNOs), which use the networks of other companies to offer telecoms services.

It will also have to divest five blocks of mobile frequencies in the 900 MHz, 1800 MHz and 2100 MHz bands to the MVNOs at a later stage and continue a network-sharing agreement with Ireland's third-biggest operator, eircom.

'It is essential that healthy competition is preserved in mobile telecoms markets. The commitments offered by Hutchison 3G ensure that Irish consumers will continue to enjoy these benefits,' EU Competition Commissioner Joaquin Almunia said.

Hutchison's 3 Ireland welcomed the EU clearance.
'It leaves 3 optimally positioned to become the No.1 player by providing the best value and service to our customers,' Chief Executive Robert Finnegan said in a statement.

Reuters reported on May 16 that the deal would be cleared by the European Commission with conditions. [ID:nL6N0O23QJ]

Almunia, who is now examining Telefonica's bid to buy KPN's E-Plus unit, told reporters that he would probably decide on the case before the Commission's July 10 deadline.

The outcome could mirror that of the Hutchison deal, telecoms lawyer David Cantor said.

'That the Commission does not appear to have insisted on the presence of a fourth mobile network operator (MNO) from day one suggests a similar solution may be found in Germany,' he said.

Sources have told Reuters that Telefonica is now talking to several German MVNOs on leasing up to 30 percent of the network capacity of the merged company, among other concessions.