EU charges Czech mobile operators with blocking rivals

By Foo Yun Chee

BRUSSELS (Reuters) - EU antitrust regulators on Wednesday charged Deutsche Telekom's <DTEGn.DE> mobile Czech unit, rival O2 Czech Republic <SPTT.PR> and Czech telecoms infrastructure provider Cetin with restricting competition via their network sharing deal.

The move by the European Commission could make it more difficult for telecoms operators to do similar deals to share networks, seen as key to saving costs and reducing time in the face of regulatory barriers to mergers.

The European Commission said the deal, which the country's two biggest mobile operators and Cetin, then part of O2 CZ, struck in 2011 and subsequently expanded, may breach the bloc's competition rules.

The network sharing agreement now covers all mobile technologies including 4G and 85% of the Czech population.

"We have concerns that the network sharing agreement between the two major operators in Czechia reduces competition in the more densely populated areas of the country," European Competition Commissioner Margrethe Vestager said in a statement.

The network-sharing deal left out the country's third operator Vodafone <VOD.L>.

The operators denied wrongdoing.

"Network sharing has undeniable benefits in the form of faster mobile internet and higher-quality coverage," CETIN, which was spun off from O2 Czech Republic in 2015, said in a statement.

O2 said network sharing was common in Europe and that the firm was prepared to allay the commission's concerns.

T-Mobile CZ also said that it strongly opposed the commission's preliminary conclusions, and that such approach could hamper development of next-generation 5G networks.

"The introduction of the much-anticipated 5G will not be possible without network sharing - given the higher costs and lower profitability of the new generation of network," Chief Executive José Perdomo Lorenzo said in a statement.

The EU competition enforcer, which opened an investigation in October 2016 and can hand out fines up to 10% of a company's global revenue, said the deal may remove the incentives for the two operators to improve their networks and services.

The companies can ask for a closed-door hearing to defend themselves.

CETIN is owned by investment group PPF of Czech investor Petr Kellner. PPF also holds a majority stake in O2 Czech Republic.

(Reporting by Foo Yun Chee; Additional reporting by Jan Lopatka; editing by Francesco Guarascio, Deepa Babington and Alexandra Hudson)