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EU Telecoms to Brussels: Show Us Some Love

NEW YORK (The Deal) -- European telecoms on Friday issued a plea to Brussels regulators to cut them some slack, just as Spain's Telefonica struggles to compile the right remedies package to win EU approval for its 8.55 billion ($11.8 billion) takeover of Royal KPN's German E-Plus unit.

Frustrated with the European Commission's consistently tough line on telecoms M&A, Telefonica CEO Cesar Alierta and peers from other top European phone companies sent an open letter to Digital Agenda Commissioner Neelie Kroes urging the EC to begin viewing Europe as a single market rather than as a collection of markets.

"This is impairing our ability to invest in the communications infrastructure needed to put Europe back on the path to growth and jobs, and to restore its global competitiveness," the executives wrote in the letter, spearheaded by the GSMA industry association.

The letter included most of the companies involved in the consolidation, although KPN was noticeably absent. Christian Salbaing, deputy chairman of the European unit of Hong Kong's Hutchison Whampoa, also added his signature to the letter: his company is at odds with Brussels over plans to buy the Irish unit of Telefonica.

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The E-Plus takeover is one of a handful of deals to have faced EC scrutiny in recent years because of the effect they would have on national competition. In common with those other deals, the acquisition by Telefonica would cut the number of mobile networks in a national market - in this case Germany - from four to three, a development that regulators around the world bridle at because of its stifling effect on competition. But the telecoms argue that the consolidation is necessary because sales are falling in Europe, even though the region has one of the world's highest penetration rates in the world. This is jeopardizing the investment in infrastructure upgrades that the region needs, they claim.

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