The European Commission yesterday approved the acquisition of Mannesmann AG by Vodafone Airtouch PLC, subject to substantial conditions comprising a commitment to divest Orange PLC and to give other mobile operators access to their inter-operator roaming and wholesale services.
The Commission's green light frees the firms to go through with the 180 billion euro ($US180 billion) merger, which will create the world's biggest mobile telecommunications firm, according to industry analysts, and the only firm currently capable of providing seamless pan-European services for customers.
"Our fundamental view is that this venture brings benefits to consumers in the shape of pan-European services, but the challenge was to avoid dominance," Competition Commissioner Mario Monti told a press conference.
Since the operation is the only company capable of providing pan-European mobile services, the Commission has imposed the obligation on Vodafone Airtouch to offer competitors access to its network for the next three years to prevent the company from creating a dominant position for these services.
The limited duration of this obligation, however, reflects the Commission's desire to provide incentive for competitors to build alternative networks.
"Our investigation revealed that for the short-term Vodafone Airtouch is the only company with a network capable of providing seamless pan-European services, but in the medium term there will be other operators," Monti said.
The Commission's concerns were also motivated by the risk that due to the overlapping operations of the two companies, the merger would eliminate competition in areas including network operations, the provision of global seamless services, fixed-to-mobile telecom links and roaming operations, according to the Commission.
To allay these concerns, Vodafone Airtouch agreed to spin off Orange and all its subsidiaries into a separate entity. In response to questions, Commissioner Monti indicated that it was up to the companies how to divest because whether "it was sold or its shares left in the hands of the existing shareholders, once divested, Orange will represent a viable competitor to the new entity," Monti said.