www.WirelessFederation.com/news: In order to to scrutinise the proposed merger of their UK mobile phone businesses, France Telecom and Deutsche Telekom are pressing for regulators in Brussels rather than London. The telecoms groups are
hopeful that European Commission’s inquiry would be shorter than one by UK competition authorities.
On the other hand, consumers feel that the proposed merger of France Telecom’s Orange UK and Deutsche Telekom’s T-Mobile UK, Britain’s third and fourth-largest mobile operators respectively will have a negative impact on the competition.
The two groups hope that Brussels will hold on to the case and the final say is of Brussels even if the UK authorities could ask the Commission to send the case to London. France Telecom and Deutsche Telekom are preparing the documents about the merger are under preparation and the companies may submit it to the Commission before Christmas, although it may not happen until January.
The length of the regulatory scrutiny will partly depend on whether France Telecom and Deutsche Telekom are willing to make concessions. Last month the two groups said they saw no need for major concessions, such as giving up valuable radio spectrum.
If consummated, an acquisition would be the biggest telecom deal since AT&T bought BellSouth at the end of 2006. Adding Alltel’s 13.2 million subscribers to Verizon Wireless’ 67.2 million would create the largest wireless carrier in the country, far ahead of AT&T with 71.4 million customers.
Talks are at a sensitive stage, according to CNBC and The Wall Street Journal. Both reports cited unnamed sources close to the discussions. Representatives of Verizon Communications and Alltel had no comment Wednesday.
Shares of Verizon Communications, the controlling parent of Verizon Wireless, dipped after the report, closing down 38 cents, or 1 percent, to $36.98 (â‚¬24). Verizon Wireless’ other parent is Vodafone Group of Britain, with a 45% share of the joint venture.
Little Rock, Ark.-based Alltel was a public company until it was bought out by TPG Capital and GS Capital Partners in November for $24.7 billion (â‚¬16 billion). It has a wide-ranging network covering parts of 35 states, mainly in the middle of the country.
A deal could save Verizon Wireless more than $1.0 billion (â‚¬650 million) per year, according to analyst Christopher King at Stifel Nicolaus. Verizon Wireless now pays hundreds of millions in roaming charges every year to Alltel, he estimated.
King also remarked that Alltel’s private-equity owners would likely jump at a chance to sell, since tight credit markets could make it difficult to wrest a profit from the highly leveraged company. He expects a deal would pass regulatory review, but Verizon Wireless may have to divest radio licenses in some areas.
Verizon Wireless uses the same network technology as the majority of Alltel’s network. That makes Verizon Wireless a more likely acquirer than AT&T, which uses an incompatible technology. Regulatory scrutiny of an AT&T deal would also be tougher, since AT&T is the largest carrier.