EU clears giant mobile phone merger in Britain

(BRUSSELS) - EU competition authorities on Monday approved a giant merger between France Telecom's Orange UK and Deutsche Telekom's T-Mobile UK to create Britain's largest mobile phone operator.

The European Commission said the two units could merge if they agreed to amend "an existing network sharing agreement with Hutchison 3G UK (3UK), to ensure that there remain sufficient competitors in the market."

The companies would also have to sell off a quarter of the combined spectrum of the merged entity in the 1800 MHz band, which is one of three frequency bands currently used for mobile communications in Britain.

"I am happy that we managed to resolve the competition issues in this case quickly in close cooperation with the Member State concerned," European Competition Commissioner Joaquin Almunia said in a statement.

The Commission said it identified no direct concerns in reviewing the tie-up for clients but believed that 3UK, owned by Hong Kong-based conglomerate Hutchison Whampoa, would face viability problems and possible elimination.

"With the merger... there will be only four players in the UK, hence the concerns about the fate of 3UK," it said, adding that the merged entity would also dominate the 1800 MHz level spectrum.

"In order to address the competition concerns... the parties concluded a revised agreement with 3UK which will secure its position as a competitive force on the market.

"The Commission concluded that the commitments offered by the parties remedy the identified competition concerns," it said.

Deutsche Telekom and France Telecom announced their plans in September in a bid to prevent rival Vodafone from gaining the upper hand in Europe's second biggest mobile market.

The merged entity would have some 28.4 million clients and a 37 percent market share, they said at the time.

The current leaders are 02, owned by Telefonica of Spain, with 27.7 percent, and Vodafone with 24.7 percent.