Telefonica exits FreeMove as EU green lights merger
11 January 2006
The European Commission late yesterday cleared the proposed acquisition of UK operator O2 by Spanish teleco Telefonica, under the condition that Telefonica undertakes to exit the FreeMove alliance.
The Commission said it was concerned that the acquisition would result in distortions of competition in the market for international roaming services, in particular in the UK and as a result, in order to remove the Commission's concerns, Telefonica has agreed to exit the alliance. In light of this commitment, the Commission said the transaction will not significantly impede effective competition in the European Economic Area.
The main cause for concern was that O2 would in the normal course of events, be expected to move from the Starmap alliance to the FreeMove alliance, or align its behavior with that of the latter, as a consequence of its dependency on Telefonica, the Commission said. As a result, O2 would be less ready to exchange international roaming traffic with non-FreeMove members. This would imply significant cost increases for those companies, in particular in the UK where no international roaming provider independent of FreeMove would remain after the transaction except for the fully integrated Vodafone group.
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