European Union (EU) authorities have approved Vodafone’s €7.7 billion ($10.4 billion) takeover of Kabel Deutschland, clearing the way for a deal aimed at creating a player that can stand up to incumbent Deutsche Telekom in the market for so-called multi-play offerings.
“The Commission’s investigation confirmed that the activities of the merging parties were mainly complementary,” said the European Commission in a statement.
Vodafone (Newbury, UK) has recently lost its leading position in Germany’s mobile market to Deutsche Telekom (Bonn, Germany) and sees the takeover of Kabel Deutschland (Unterfoehring, Germany), which operates the country’s biggest cable network, as a means of competing more effectively against the incumbent in the market for bundled offers that include both fixed and mobile services.
A merger of its German business with Kabel Deutschland should also allow Vodafone to reduce its reliance on a wholesale arrangement with Deutsche Telekom for the provision of fixed-line services.
Deutsche Telekom has stepped up its own efforts in Germany’s broadband sector, after losing market share to cable operators providing higher-speed services, and has recently won EU authorization to begin deploying vectoring technology that should boost the performance of its VDSL network.
Vodafone happens to have signed a wholesale deal with Deutsche Telekom for the use of vectoring technology, and the tie-up with Kabel Deutschland raises questions about that relationship.
Deutsche Telekom, however, has said the merger between Vodafone and Kabel Deutschland will be hard to execute and could even represent a wholesale opportunity for it in the short term.
As noted in the European Commission’s statement, the Kabel Deutschland network does not cover the regions of Baden-Wurttemberg, North Rhine-Westphalia and Hesse, where Vodafone will presumably have to continue relying on its deal with Deutsche Telekom.
Authorities said they had no objections to the merger because Kabel Deutschland has few mobile telephony interests, while Vodafone is relatively weak in Germany’s fixed-line sector.
“The Commission found that in markets where the parties’ activities overlap, the increase in market share resulting from the proposed transaction is insignificant and will therefore not appreciably alter competition,” it said.