German Cartel Office Warns Liberty it Will Block Cable TV Takeover

29 January 2002

Insiders at Germany’s Federal Cartel Office have let it be known that Liberty Media will fail in its E5.5 billion bid to acquire a controlling 60% stake in Deutsche Telekom's cable TV network. According to the bureaucratic blabbers, Liberty’s tabled concessions for the takeover are too few and insubstantial.

Although the official probe is not scheduled for completion until February 28, German law requires the regulator to notify all interested parties that it intends to block the deal, at the same time detailing the actions required to address the antitrust issues.

The issue, in this instance, is the elimination of competition within Germany’s cable TV sector if Liberty – which already owns stakes in minor networks Primacom and UPC – proceeds with its plan to acquire stakes in the remaining operators that comprise the final link in the cable TV distribution chain. Currently, customers are free to switch to another network on expiry of their existing contracts – an option that would disappear under Liberty’s expansion plan.

This is the latest – and possibly final – hand in the poker game between Liberty and the Cartel Office. The latter has oft reiterated that the deal will receive the green light only if Liberty ensures greater competition in related markets such as telephony and the internet.

Liberty’s stance is that it is unwilling to incur the higher costs of harnessing the latest technology to develop these markets at the pace demanded by the Cartel Office. The US company insists it will abandon the project if approval is refused.

If this happens, Liberty has two remaining options: legal action against a ban; or an appeal for special ministerial clearance. The latter, say government sources, is unlikely. Deutsche Telekom, meantime, has made it known that it will seek a new buyer if the deal collapses.

News source: Handelsblatt (Germany)