EU investigates Deutsche Telekom's Dutch deal amid competition concerns

By Foo Yun Chee and Olof Swahnberg

BRUSSELS/STOCKHOLM (Reuters) - Deutsche Telekom (DTEGn.DE) faces a four-month investigation into its bid to buy the Dutch business of Swedish peer Tele2 (TEL2b.ST) after EU antitrust regulators voiced concerns about the deal.

The European Commission's investigation, which began on Tuesday, underscores its hard line against telecoms deals which reduce the number of players in a market from four to three and could hit consumers with higher bills.

"We are opening this in-depth investigation to ensure, that the proposed transaction between T-Mobile NL and Tele2 NL will not lead to higher prices or less choice in mobile services for Dutch consumers," European Competition Commissioner Margrethe Vestager said in a statement.

Her decision to delve deeper into the deal confirmed a Reuters story earlier on Tuesday.

The EU competition authority will decide by Oct. 17 whether to clear or block the deal, depending on whether Deutsche Telekom and Tele2 offer concessions.

Tele2 said the lengthy investigation was expected and reiterated its goal of closing the deal in the second half of the year.

Vestager scuppered a plan by Telia Company (TELIA.ST) and Telenor (TEL.OL) to merge their businesses in Denmark in 2015, saying they had failed to allay her concerns about the reduced number of players in her home country after the deal.

A year later, she blocked CK Hutchison Holdings' bid to merge its Three UK subsidiary with Telefonica’s (TEF.MC) O2 UK, but then allowed Hutchison to combine its Italian mobile network unit with that of Vimpelcom after securing hefty concessions.

Telecoms operators have long urged the Commission to take a broader view of the industry and not focus only on the number of telecoms operators in a market, while regulators say a softer line may be justified in the case of cross-border mergers.

Deutsche Telekom wants to buy Tele2's Dutch assets and combine them with its T-Mobile Nederland so it can offer so-called fixed-to-mobile convergence packages, allowing for transmission of data, voice and video to devices at home or on the go and better compete with KPN (KPN.AS) and Ziggo.

T-Mobile Nederland and Tele2 are the third and fourth biggest players in the Netherlands, a market dominated by KPN which had a 43 percent share of the market at the end of 2017, followed by Ziggo with 30.5 percent.

T-Mobile Nederland was a distant third at 21 percent while Tele2's share was negligible.

(Reporting by Foo Yun Chee in Brussels and Olof Swahnberg in Stockholm; additional reporting by Toby Sterling in Amsterdam, Nadine Schimroszik in Berlin and Daniel Dickson in Stockholm; Editing by Robert-Jan Bartunek/Mark Potter/Susan Fenton)