December 10, 2012 / 3:23 PM / 5 years ago

UPDATE 1-Watchdog to say 'no' to Telekom Austria Yesss deal-paper

* BWB spokesman says regulator will appeal cartel court decision

* BWB spokeswoman says no official decision yet

* Delay could give Telekom Austria way out of expensive deal (Adds fresh comment from BWB, Orange, details, background)

VIENNA, Dec 10 (Reuters) - Austria’s competition regulator is to object to Telekom Austria’s acquisition of local budget brand Yesss, a spokesman told a newspaper, threatening a broader deal to cut competition in the Austrian mobile market.

Though a spokeswoman for the BWB regulator later said there was no official decision yet on whether to appeal against the Austrian cartel court’s approval of the deal, the spokesman’s comments increased uncertainty surrounding the two agreements.

The agreement for Telekom Austria to buy Yesss, currently owned by Orange, is a condition of Hutchison Whampoa’s 1.3 billion euro ($1.7 billion) deal to buy Orange Austria, which is awaiting approval from the European Union.

“We will appeal the decision,” the spokesman for the BWB told Austria’s Wirtschaftsblatt, referring to last month’s ruling by Austria’s cartel court, which said that the deal would not harm competition.

When contacted by Reuters on Monday, the spokesman referred requests for comment to a colleague, who said that there was no official decision yet.

“The decision will come at the end of the week or the beginning of next week,” the BWB spokeswoman told Reuters, but she confirmed that the BWB still had concerns about the deal.

The BWB spokesman had told the newspaper: “A merger (of Yesss and Telekom Austria) would lead to considerable disadvantages for consumers and does not promote competition but rather hinders it, from our point of view, and should therefore not go ahead.”

Yesss has about 740,000 customers and would raise Telekom Austria’s market share to 47 percent from 45 percent. Austria’s cartel court said last month when approving the deal that this would not make Telekom Austria market-dominant.

Both Telecom Austria and Orange Austria said they had no comment and had not been informed of any BWB decision to appeal.

POTENTIAL WAY OUT

If the Yesss deal falls apart, it would scupper the consolidation of Austria’s mobile market from four to three operators. Developments are being watched closely in other European countries, with companies looking for a signal that similar deals could happen elsewhere.

Even an unsuccessful appeal would delay approval beyond the January 31 expiry date of the deal, giving Telekom Austria a potential way out of an acquisition that looks far less attractive than it did when it was agreed a year ago.

Telekom Austria has agreed to pay 390 million euros for the Yesss business, a high price for the cash-strapped company to pay, but one it judged worthwhile to smooth the way to cutting the number of carriers in Austria’s fiercely competitive market.

Since Telekom Austria agreed to buy Yesss, it has warned on profits and twice cut its dividend as it seeks to conserve cash for an auction of mobile frequencies next year and to keep its credit rating.

In the meantime, Hutchison has offered remedies to the European Commission, including the opening up of its network for new entrants to the market, which would reduce the benefits of consolidation for incumbents.

“The cash and the leverage situation is more serious for Telekom Austria than market repair,” Espirito Santo telecoms analyst Andrey Hogley told Reuters when the cartel court approved the Yesss deal last month.

“The damage has been done in the Austrian market and, even with consolidation, EBITDA (earnings before interest, tax, depreciation and amortisation) is going to fall a long way next year.”

Austria was among the first countries in Europe to impose steep cuts to the fees carriers charge one another for connecting calls, opening the way for aggressive pricing that has resulted in all-inclusive deals as cheap as 7 euros a month.

The European Commission is due to give its decision on the Hutchison-Orange deal by Dec. 21. ($1=0.7735 euros) (Reporting by Georgina Prodhan; Editing by Greg Mahlich and David Goodman)

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