British telecom giant Vodafone Group plc (VOD,VOD.L) has called off its talks with Largo Ltd. about merging their operations in Greece, according to media reports on Sunday. The talks are said to have been called off amid concerns that the deal would not meet EU regulations.
Vodafone is the second-biggest mobile operator in Greece, behind Cosmote, a unit of Hellenic Telecommunications Organization SA (HTO.AT), or OTE. Deutsche Telekom AG (DTEGY.PK), in June 2011, had raised its stake in OTE to 40 percent. Largo's Wind Hellas Telecommunications SA is Greece's third-biggest mobile operator.
Vodafone had been eying Wind Hellas for long with an aim to increase its own presence in Greece. In late August, Vodafone said it entered into talks with Largo to explore a potential business combination between its Greek unit and Wind Hellas.
Largo is the holding company established by a group of senior bondholders to take full control of Wind Hellas, after it was acquired from Egyptian billionaire Naguib Sawiris in late 2010.
Wind Hellas' owners were planning a potential sale as the carrier was in severe financial trouble following the Greek economic crisis, and currently requires about 300-350 million euros for its revival. Both Vodafone and Wind Hellas had experienced difficult market conditions due to Greece's beleaguered economy.
However, regulators in Europe are said to be concerned about the precedent being set by allowing a duopoly to exist in a European mobile market. A merger between Vodafone's unit and Wind Hellas would have reduced the number of full-service mobile phone companies in Greece to two, compared with four in France, Italy and Spain, and three in Austria.
According to media reports, Vodafone and Wind Hellas are now seeking other ways to co-operate, such as sharing cellular network infrastructure.
Over the past 18 months, Vodafone has sold minority shareholdings in other countries to focus on its main businesses in Europe, India and the U.S. In early November, Vodafone said it recorded an impairment loss of 450 million pounds in relation to Vodafone Greece for the first half of the year, ending September 30.
Among other recent deals in the industry in Europe, Hutchison 3G Austria, a unit of Hong Kong-based conglomerate Hutchison Whampoa Ltd. (HUWHF.PK, HUWHY.PK) said last Thursday that it has agreed to buy Orange Austria from France Telecom SA (FTE) and private equity firm Mid Europa Partners for an enterprise value of about 1.3 billion euros, or $1.72 billion.
That deal combines the third and fourth largest players in the Austrian mobile telephony market, and is part of the ongoing consolidation in the telecom market in Europe.
VOD closed Friday's trading at $27.87, up $0.64 or 2.35 percent on a volume of 8.73 million shares.
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