Bloomberg News

EU Extends Probe of Hutchison’s Orange Austria Takeover

June 29, 2012

The European Commission opened a full antitrust probe into Hutchison Whampoa Ltd. (13)’s planned 1.3 billion-euro ($1.6 billion) purchase of rival mobile-phone operator Orange Austria on concern it may reduce competition.

The Commission, the European Union regulator in Brussels, said in a statement today that the proposed acquisition of Orange Austria from France Telecom SA (FTE) and Mid Europa Partners may create problems by removing a competitor. The move comes a day after an Austrian probe into a side deal of the Orange purchase also went to the next stage.

“The merger will reduce the number of network operators from four to three in Austria,” EU Competition Commissioner Joaquin Almunia said in the statement. “Therefore, the commission must make sure that this concentration does not lead to higher prices for end consumers.”

Hutchison’s 3 Austria is the smallest wireless operator in the country of 8.2 million people, where it competes with Orange, Telekom Austria AG and Deutsche Telekom AG (DTE)’s T-Mobile. That’s the same number of network carriers as in northern neighbor Germany, with a population of 82 million.

“In mobile, Austria remains one of the most competitive markets, with pricing in steep decline that is showing no signs of slowing,” Barclays analysts in London led by Jonathan Dann wrote in a note today.

Approval Confidence

Hutchison said in a statement that the Orange purchase would benefit customers and that it remained confident the European Commission will approve the deal. “While this is a complex transaction which involves process with numerous parties, the combined business will put 3 Austria in a better position to challenge the incumbent operators,” it said.

The company controlled by Hong Kong billionaire Li Ka-shing agreed to buy Orange in February. Hutchison is Li’s biggest company, with investments in telecommunications, ports, energy, retail and utilities in more than 50 countries.

Austria’s competition authority yesterday extended the probe of a side deal to the Orange purchase, in which Telekom Austria plans to buy about 700,000 clients using Orange via the discount brand Yesss!. That probe will be prolonged by at least five months after Telekom Austria and Yesss! failed to “dispel concerns” on the deal, the watchdog said.

Telekom Austria may drop the deal because it isn’t willing to make concessions to the regulator, WirtschaftsBlatt reported today, citing unidentified people familiar with the deal. This may reduce the price of the main transaction to 1.1 billion euros, the newspaper said.

Telekom Austria still wants buy the Yesss! clients as long as the conditions for the acquisition are acceptable, spokesman Alexander Kleedorfer said in an e-mail. Olivier Emberger, a France Telecom spokesman, declined to comment.

To contact the reporter on this story: Boris Groendahl in Vienna at bgroendahl@bloomberg.net

To contact the editor responsible for this story: Frank Connelly at fconnelly@bloomberg.net


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