Telefonica SA share price down, wins European Commission approval for the 11.7-billion-dollar acquisition of E-Plus

The European Commission made an official statement, revealing that Telefonica SA won the approval of the European Union to merge its German unit with the E-Plus division of Royal KPN NV.

The antitrust chief of the European Union – Mr. Joaquin Almunia – said at a press conference, which was cited by Bloomberg, that Telefonicas concessions mean “the deal no longer poses competition concerns”. Mr. Almunia added: “Now the three mobile operators will have more or less the same market share and the same strength” in Germany.

According to the European Commissions statement, before finalizing the deal, the company needs to dispose of about 30% of the merged carriers network capacity by selling it to one or several virtual operators. In addition, spectrum and assets must be offered by the merged company to both new start-ups and already existing virtual operators.

The regulatory authorities explained that the merger that is expected to create the biggest mobile operator in customer terms in Germany will only be finalized, if the conditions presented by the European Commission are fully met.

The takeover of Royal KPN NVs E-Plus is estimated to 8.6 billion euros (11.7 billion dollars). The deal has faced both political pressure and unprecedented disfavor by national regulators amid the rapidly changing telecommunications industry in Europe. Currently, the European regulatory authorities are trying to keep sufficient competition among the telecom operators in order to avoid price increases.

The deal between the German division of Telefonica and Royal KPN NVs E-Plus is considered as the largest acquisition of the Spain-based company since 2005 when Telefonica purchased O2 Plc. After the deal has been finalized, the number of German mobile network operators will be reduced from four to three, which has previously been considered a disturbing figure.

Telefonica SA fell by 0.91% on Wednesday in Madrid to close at 12.56 euros per share, marking a one-year change of +27.16%. The carrier is valued at 57.66 billion euros. According to the Financial Times, the 32 analysts offering 12-month price targets for Telefonica SA have a median target of 11.75 euros, with a high estimate of 14.50 euros and a low estimate of 8.20 euros. The median estimate represents a -7.26% decrease from the previous close of 12.67 euros.