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Vodafone's Colao, DT's Höttges Lock Horns in Barca

Iain Morris
2/27/2018

BARCELONA -- MWC 2018 -- Spain is famous for its bullfights, but they don't usually happen at the Mobile World Congress.

Not your traditional matador-versus-bovine contest but a clash between two snorting alpha males, the scuffle saw Vittorio Colao, the feisty Italian CEO of Vodafone Group plc (NYSE: VOD), lock horns with Timotheus Höttges, the no-nonsense Teutonic giant in charge of Deutsche Telekom AG (NYSE: DT), over a prospective merger between Vodafone and Liberty Global Inc. (Nasdaq: LBTY) in the German market.

Vodafone has not said it is in talks to acquire Unitymedia, Liberty's cable network in Germany, and merge it with its own network. But the word on the street is that confirmed talks between the UK-based operator and Liberty are mainly about these particular assets. (See Vodafone in Talks to Acquire Liberty Global Assets.)

Colao Versus Höttges
A bullfight has broken out at this year's Mobile World Congress.
A bullfight has broken out at this year's Mobile World Congress.

The combination would produce a stronger rival to Deutsche Telekom, which has continued to lose market share to the country's cable operators despite its investments in higher-speed (albeit not fiber-to-the-premises) fixed-line networks.

During an earnings call with analysts last week, Höttges made his feelings about the prospective tie-up very clear, describing it as "unacceptable" and urging regulators to block the move.

In the red corner, Colao had the opportunity to hit back at this week's Mobile World Congress in Barcelona. "I have to be careful not to become personal," said Colao during a press conference with reporters. "I was surprised by his comments. He is a giant talking about shutting down competition. If I were him I would not do that."

Colao went on to say that he thinks Höttges is feeling jittery because of Vodafone's sterling performance in the German market in recent months. "I look at our results versus theirs and maybe he is a bit nervous," he said.

So what's Höttges's beef? Back in the magenta corner, the rangy executive was given the opportunity to explain his objections during a Deutsche Telekom press conference Monday afternoon, and he wasn't for backing down.

"History makes this deal unacceptable," he said, using one of the words that seemed to upset Colao so much the first time around. "We [previously] sold cable infrastructure and had to put it in three pieces because antitrust authorities didn't want cable dominance. If Liberty and Vodafone come together they will create a monopoly in the cable market."

He didn't stop there. "The dominance in TV combined with telecom is tricky for democracy," he said. "This deal is unacceptable from a competitive perspective."


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Put in those terms, Höttges's arguments are pretty hard to fathom. Deutsche Telekom remains the only nationwide communications operator in Germany with fixed and mobile networks as well as a TV offering. Höttges appears to be complaining about the possibility that another German company could emerge with a nationwide or near-nationwide presence -- something regulatory authorities and consumers would surely welcome in many countries.

Perhaps his concern is that Vodafone will escape the same kind of regulatory strictures that bind Deutsche Telekom. In other parts of Europe, certainly, there is a preponderance of asymmetrical regulation, under which former state-owned monopolies are given less freedom than other operators.

In Spain, for example, Orange has been able to roll out fiber networks without being forced to open its infrastructure to broadband retail rivals -- unlike incumbent operator Telefónica.

"You have a nationwide player saying a competitor should not be able to buy a regional player because this creates a kind of threat," said Colao. "If you follow that logic then Deutsche Telekom should be split in two -- east and west -- so it is an illogical statement. I understand why it irritates him but it is maybe not for the right reasons."

Over to you, referee.

— Iain Morris, News Editor, Light Reading

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Clifton K Morris
Clifton K Morris
2/28/2018 | 4:17:45 PM
DT could conceivably insert a political wedge to prevent customer choice.
DT has a capital structure where it can use political pull to gain a ruling which is actually anti-competitive and prevents consumer choices and new entrants. DT, is a former Government monopoly, with a history of being an extension of Germany’s post office. And also, it is still partially owned by The German Government along with KfW, a government-controlled investment bank. This structure is unique to Germany. Perhaps the closest way to describe it is if Goldman Sachs was owned by the US Government, it’d have similar political pull and Government protection. So by stating that Vodafone has to adhere to certain Anti-Trust regulations which were applied to DT is a bit disingenuous, especially considering how Germany prefers nationalizing industries over free-market principals.
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