Brussels to probe proposed TeliaSonera and Telenor joint venture

The European Commission has launched an in-depth investigation into a proposed joint venture between TeliaSonera and Telenor in Denmark over concerns the deal between the two telecoms companies could lead to increased prices and reduced innovation.

The probe is an important test case for Margrethe Vestager, the new competition commissioner, who has signalled that she is ready to harden the EU's stance on consolidation in the telecoms sector.

Ms Vestager expressed concerns that prices could rise and that competition could be undermined, particularly in countries where the number of operators is projected to drop from four to three.

Last month she described the Danish deal as a "textbook example", because the joint venture between Sweden-based TeliaSonera and Norway-based Telenor would leave only two competitors in the Danish market: TDC and Hi3G.

The commission said that it was worried that the transaction could reduce "the merged entity's and it competitors' incentives to compete, leading to higher prices, loss of innovative offers and lower quality on the Danish retail communications market".

It added that the deal could lead to "co-ordination between the remaining operators", rather than competition.

Ms Vestager said: "My aim is to make sure that the proposed transaction will not lead to higher prices to Danish consumers and businesses."

The commission said it should reach a decision by August 19. Brussels has the power to block the deal or to demand remedies from the two companies.

TeliaSonera said it was confident that the deal would be approved. "We believe that this merger will create a strong and robust competitor across fixed and mobile markets in Denmark. Consumers and businesses will benefit from improved network connectivity, higher speeds and better performance in all areas of the country," it said in a statement.

Consolidation across Europe's telecoms industry has come under increasing scrutiny from EU competition authorities. A decision on Orange's acquisition of Jazztel in Spain is expected by June 1.

Competition lawyers also expect Hutchison Whampoa's £10bn purchase of UK mobile group O2 from Spain's Telefonica to receive an in-depth investigation from Brussels.

The commission has approved similar cases in Austria, Ireland and Germany but industry lawyers in Brussels expect Ms Vestager to take a tougher line than her predecessor, Joaquin Almunia.

While the telecoms industry argues that consolidation is vital to build scale and upgrade infrastructure, Ms Vestager has stressed the need to protect consumers and has already come under pressure to block the Danish deal.

In an interview with the Financial Times last month, she said there were warning signs from the outset.

"When the merger was announced in Denmark . . . what happened was that the share price of the incumbent rose more than the share price of the two merging parties, which was immediately interpreted as there would be less competition, so that prices could go up."

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