The European Commission on Wednesday approved the €5 billion acquisition of German operator E-Plus by local rival Telefonica Deutschland, almost a year after the deal was agreed.
The merger attracted EU scrutiny since it will reduce the number of mobile network operators in the country to three from four.
To address the Commission's concerns, Telefonica has agreed to a number of remedies, including selling up to 30% of the combined entity's spectrum holdings to an MVNO or facilitating the entry of a new MNO. Telefonica has already made good on this pledge, announcing last week it will sell 20% of its network capacity to virtual player Drillisch over a five-year period, and give it the option to buy an additional 10% at a later date.
Telefonica has also committed to extending existing wholesale agreements with its own and E-Plus' current MVNO and service provider partners, and has agreed to offer wholesale 4G access in future.
"The remedies to which Telefonica commits ensure that the acquisition of E-Plus will not harm competition in the German telecoms markets," said EU competition commissioner Joaquín Almunia, in a statement. "Consumers will continue to enjoy the benefits of a competitive market."
Telefonica Deutschland agreed to acquire E-Plus from Dutch incumbent KPN in July 2013 for €5 billion in cash and a 17.6% stake in the combined entity. Telefonica later sweetened the deal by offering KPN a 20.5% stake.
The combination of the companies' subscriber bases will create a new leader in the German mobile market with 44.8 million customers as of the end of March. T-Mobile will be relegated to second with 39.1 million, while Vodafone will rank last with 32.3 million (see chart).
Some argue that Telefonica getting the go-ahead from Brussels to acquire E-Plus will set the blueprint for consolidation in Europe.
Coleago Consulting told Total Telecom earlier this year that EU approval could spark a wave of global M&A activity over the next five-to-10 years, arguing that it is better to have three strong players in a market than two dominant ones and two weak ones.