Liberty Media Digs-In Heels in Spat With German Cartel Office

28 December 2001

Liberty Media’s would-be E5.5 billion ($4.85bn) takeover of Deutsche Telekom’s cable assets appears to have reached stalemate after the US-owned media giant refused to appease Germany’s Cartel Office with concessions over competition concerns.

In a 78-page submission delivered to the watchdog on December 21, Liberty rejected misgivings that the deal would give it a dominant position in the nation’s cable TV market. The fears – raised by rival broadcasters Bertelsmann, Kirch Gruppe, ARD and ZDF – were, Liberty argued, motivated by a craving “to maintain, as long as possible, [their] lucrative oligopoly.”

The submission dismissed the present segmented market structure as “artificial”, arguing that its own plan to accelerate the roll out of digital television would prevent cable's position from being eroded by satellite.

The US company also refuted that its strategy of acquiring minority holdings in content providers allows it privileged access to programming. On the contrary, it argued, its digital platform should reach critical mass within 3-4 years, allowing it to break the alleged “closed shop” operated by rival broadcasters by independently buying and repackaging program content.

As to the Cartel Office’s proposal that Liberty commit to investment milestones in telephony and internet access, the latter was scornful. Current developments in data compression, it argued, suggested its extant investment program of E8.3bn until 2010 was more than adequate to provide viable telephony and broadband internet access in the short term.

The regulator has until February 28 to rule on the deal, which chairman Ulf Böge has said he is unlikely to approve as it currently stands. Confirming Thursday it had received Liberty’s response, the Cartel Office declined to comment on its content, saying only that it will meet again with Liberty representatives early in 2002.

News source: Financial Times