Vodafone bid for Mannesmann set for EU approval

Date: 27/01/2000

By Renée Cordes

Vodafone AirTouch's hostile take-over bid for Mannesmann will sail through a routine investigation by EU regulators according to analysts, who say the combined company will face adequate competition in most European telecoms markets.

European Commission competition officials are, however, likely to keep a close eye on the merged entity if and when the deal goes through amid concerns that continued consolidation in the industry could eventually lead to it being dominated by a handful of strong players.

Vodafone, the world's largest cellular phone group, formally launched the largest ever hostile take-over bid last December for German rival Mannesmann, the world's third biggest mobile phone operator, to strengthen its position in several European markets.

Vodafone said its offer, which came two months after Mannesmann paid more than €29 billion for control of Vodafone's UK rival Orange, did not depend on the planned take-over coming through the regulatory process unscathed.

The Commission has warned that the planned take-over is likely to create a "significant competitive overlap" in the UK, where the merged company would operate two mobile phone licenses - its own and that owned by Orange.

But assuming Orange is spun off as expected, analysts believe the combined company would not be dominant enough in any one European market to hamper fair competition and the deal will therefore be cleared by the Commission.

"They are not competitors in any one market except for the UK and that will be quickly de-merged," said Tressan MacCarthy, a London analyst at Credit Lyonnais Securities.

In Germany and Italy, for example, there would still be four and three mobile phone operators respectively. "I do not see how they can think there is any problem with competition," said MacCarthy. But she added that the Commission might "put out a watching brief to make sure it does not become too powerful".

EU regulators are set to deliver their verdict on the deal by 17 February following a routine inquiry into Vodafone's offer, which is valued at more than €130 billion. Anti-trust officials launched their investigation after Vodafone notified the offer earlier this month, even though Mannesmann has yet to accept the bid. The company's board has opposed the offer from the start, arguing that the German company would be better off remaining independent.

The Commission's public statement earlier this month setting out its concerns about a potential overlap in the British market was unprecedented at such an early stage in an investigation, but regulators said they had decided to act to clarify conflicting statements made by the companies. "The Commission has started the investigation, which will include the gathering of information on customers and competitors in the market for mobile telecommunications," said the statement.