European Commission approves Vodafone buy of Kabel Deutschland

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"The commission's investigation confirmed that the activities of the merging parties were mainly complementary," the European antitrust watchdog said. "The commission found that in markets where the parties' activities overlap, the increase in market share resulting from the proposed transaction is insignificant and will therefore not appreciably alter competition."

The deal is a coup for Vodafone, which wants to use Kabel Deutschland's fixed-line network to diversify its offering in Germany beyond its core mobile-phone business. In particular, it will allow Vodafone to offer high-speed broadband Internet services via its own network, rather than having to pay fees to its competitor Deutsche Telekom AG DTE.XE +0.48%for use of its network.

Vodafone said it expects to finish the deal by October 14, and that Kabel Deutschland shareholders can accept the offer for their shares until the end of September.

Kabel Deutschland said the EU's move cleared the last remaining stumbling block for the transaction.

The merged entity wouldn't be in a position to leverage Kabel Deutschland's market power in the wholesale market for TV signal transmission by cable into the IPTV market, where Vodafone has only limited activities, the commission said.

In addition, Vodafone's demand for wholesale pay TV channels and its share in retailing TV services are very limited; likewise, it doesn't compete with Kabel to supply TV to blocks of apartments and houses. Moreover, regional cable operators and former state-owned monopoly Deutsche Telekom will continue to provide competition to the new company.

The same applies with mobile telephony, as Kabel Deutschland doesn't have a network. Being able to offer bundled services including TV, Internet, landline and mobile services may even make Germany's market more competitive.

"On balance, the commission therefore considers that the possibility for the merged entity to offer more attractive triple or quadruple play bundles based on its own infrastructure... may have a pro-competitive dimension," the commission said.

Earlier this week, the U.K. telecommunications company said it secured a 76.5% stake in Kabel Deutschland for €7.7 billion, well above the 75% threshold it had set itself for the deal to materialize.

Vodafone gained large financial leeway earlier this month when it agreed to sell its 45% stake in Verizon Wireless to Verizon Communications Inc. for about $130 billion.

Kabel Deutschland generated €1.83 billion revenue in the fiscal year ended March 31. With 8.5 million household customers in 13 of Germany's 16 states, Kabel Deutschland is Germany's biggest TV cable network operator.

(Published by WSJ - September 20, 2013)