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German telcos express concern over Vodafone’s €18.4bn Liberty deal

German telcos Deutsche Telekom and Telefonica Deutschland have hit out following Vodafone’s announcement of a proposed €18.4bn ($22.2bn) takeover of media company Liberty Global’s European assets.

Vodafone has agreed to acquire Unitymedia in Germany and Liberty Global’s operations, excluding its Direct Home business, in the Czech Republic, Hungary and Romania, for a total enterprise value of €18.4bn. This is expected to comprise approximately €10.8bn of cash consideration paid to Liberty Global and €7.6bn of existing Liberty debt, subject to completion adjustments.

Unitymedia is the second largest cable operator in Germany and Vodafone has expressly stated that it aims to create a converged national challenger to the dominant incumbent, Deutsche Telekom, with the scale to accelerate achievement of the German government’s digital ambitions.

Telekom and Telefonica, the third-biggest player in Germany, have both responded to this call with unease over the potential deal. Deutsche Telekom chief executive Tim Hoettges has argued that any such deal should mean that regulation of the company, which is required to open up its domestic fixed-line network to third parties at controlled prices, should be eased.

“I personally will fight for fair competition for our customers, to ensure that we do not face a disadvantage, and can fight with the same weapons,” Hoettges said, according to the Reuters news agency.

Telefonica Deutschland chief executive Markus Haas added: “It’s clear that the announced transaction would create a monopoly in cable content distribution and a de facto duopoly in fixed-line infrastructure in Germany. We therefore expect close scrutiny from the responsible competition authorities. If this combination is in any way approvable, then only under appropriately strict conditions.”

Vodafone and Liberty have both pointed to the benefits of the deal, stating their conviction it will be approved. Vodafone chief executive Vittorio Colao said, according to the Bloomberg news agency: “The EU has always been talking about the need to have cross-country competitors in telecoms. This is actually the first and biggest creation of one of those, both in mobile and fixed.”

Liberty Global chief executive Mike Fries added: “(The deal is) exactly what the German market needs, which is a stronger, more consolidated competitor to Deutsche Telekom in a market that has really lagged in innovation and investment. So I think this will get approved and I think it’s definitely in the best interests of consumers and we’ll make that argument.”