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EU Pressures Vodafone to Cancel Greek Merger

Vodafone Group decided to abandon an attempt to merge its Greek unit with rival Wind Hellas after facing European Union regulatory opposition.
Vodafone and Largo Limited, the sole shareholder of Wind Hellas, “agreed to terminate discussions relating to a potential business combination between Vodafone Greece and Wind Hellas,” the British phone company said in a statement today.
A successful merger would have reduced the number of full-service mobile-phone companies in Greece to two, compared with four in France, Italy, and Spain. It would have allowed Vodafone to reduce costs and better compete in the country with Hellenic Telecommunications Organization SA, or OTE, which is controlled by Deutsche Telekom AG (DTE).
Vodafone Greece, which has about 4 million customers, has been a burden for the Newbury, England-based company. In November, Vodafone booked an impairment loss of 450 million pounds ($710 million) for its business in Greece, citing lower cash flow and an increase in discount rates. During last year’s sales period, Vodafone had already lowered the value of its Greek operations by 800 million pounds.
Wind and Vodafone are struggling against cell phone market leader Cosmote, a unit of former state monopoly OTE, which has almost half of Greece’s mobile phone market, with Vodafone and Wind distant runners-up.
However, the source cited by the FT said the argument of difficult market conditions was unlikely to be acceptable under competition rules.
People with knowledge of the talks, cited by the FT, said the two companies could carry on talks to share networks, which is more likely to be permitted by European regulators and would still allow some cost savings.
(source: Bloomberg, Reuters)

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