LONDON (CNNfn) - European Union antitrust regulators approved Vodafone AirTouch's $173 billion acquisition of German telecom operator Mannesmann Wednesday, attaching conditions that analysts said would not significantly damage the world's biggest mobile-phone company.|
However, more deals in the European phone sector seem sure to follow after the EU ruled that Vodafone must immediately sell the German company's U.K. cellphone unit Orange. Its other main requirement was that Vodafone open its networks to competitors for three years.
Vodafone secured control of Mannesmann in February after a hostile, four-month battle. Chief Executive Chris Gent had promised he would do whatever it took to secure approval from competition authorities.
In approving the takeover, the European Commission, the Brussels-based executive arm of the European Union, imposed conditions that it said would ensure the enlarged company's position does not distort competition in the U.K. and Belgian markets. After buying Mannesmann, Vodafone will be Europe's most popular cellular operator with 31 million subscribers in the region, and a total of 42 million worldwide.
"There is nothing nasty there," said a London-based cellphone industry analyst who declined to be named.
Worst fears not realized
Analysts were reassured that the EU's conditions would have little commercial impact.
Their biggest concern was that in ordering Vodafone to give rival cellphone companies access to its networks, the Commission could have prevented the dominant company from earning a profit on carrying rivals' calls, while giving competing companies unlimited access to its infrastructure. That could have flooded its network capacity and generated minimal revenue, as call transmission costs are near zero once the infrastructure has been installed. The Commission, though, gave Vodafone a free hand to set charges for access to its networks.
Regarding the EU's other main condition, the requirement that the U.K. company immediately divest Orange as a standalone unit was expected. Mannesmann last year bought Orange, Britain's third-largest cellular network, for $32 billion, and Vodafone's purchase of the German company brought Orange under the same ownership as Vodafone's own U.K. mobile network, already the country's largest. France Telecom (PFTE) has expressed firm interest in buying Orange to extend its European reach.
Atecs fate still undecided
The Commission's ruling also opens the way for a final decision on the fate of Atecs, Mannesmann's electronic components business. The Mannesmann board originally said the unit was slated for a flotation later this year. However, there have already been two cash offers for the company: a joint bid from German industrial and electronics firms Siemens (FSIE) and privatekty owned Bosch, as well as a smaller offer from German industrial firm ThyssenKrupp (FTKA).
Although Vodafone is believed to favor a trade sale, Mannesmann has legal responsibility for deciding the future of Atecs. The U.K. firm said it would consider the offers for Atecs after the Brussels ruling. The Mannesmann board is due to discuss the matter on Monday.
Vodafone (VOD) shares rose 2.8 percent to 322 pence immediately after the Commission decision. That lifted its valuation to £200 billion ($344 billion), making it by far Europe's largest company by market capitalization.
Separately, Vodafone continued to top the bidding Wednesday in the auction for the five third-generation mobile-phone operating licenses that the British government is selling by auction. It bid £4.55 billion for the coveted B license, which offers the broadest spectrum of the five licenses up form sale. Orange topped the bidding for the E license, with a £3.35 billion offer.