By Archibald Preuschat
The merger between cable network operator Kabel
Baden-Wuerttemberg and Unitymedia, a unit of Liberty Global PLC
(LBTYB), could be unwound after a German court Wednesday upheld
anti-trust concerns from Netcologne and Deutsche Telekom AG
(DTE.XE).
The court in Dusseldorf said conditions imposed on the deal by
Germany's cartel office wouldn't prevent a market dominant position
if Kabel BW and Unitymedia merged. While the companies are active
regionally and don't compete at the moment, that would likely have
changed without a merger over the next few years, the court
ruled.
A Unitymedia spokeswoman said it would appeal the decision at
federal court.
If the ruling is upheld on appeal, the cartel office will have
to examine whether the merger can take place under altered
conditions. If not, the companies will need to unwind the completed
merger.
Liberty bought Kabel BW in 2011 for just under $4.5 billion and
merged it with its Unitymedia unit in 2012. The deal was only
approved by the German anti-trust authority after the companies
agreed to an array of conditions. Among them, Unitymedia agreed to
give up exclusive rights to contracts from large customers as well
as ownership rights to networks within buildings.
At the time, the cartel office said the conditions strengthened
the competitive situation for third parties, offsetting any
disadvantages they would suffer from the merger.
Deutsche Telekom welcomed the ruling and said the conditions
imposed by the cartel office wouldn't have supported a competitive
market structure.
A Netcologne spokesman told Dow Jones a merger of the two
wouldn't be appropriate under any conditions. The spokesman also
said it would also closely scrutinize Vodafone Group PLC' s (VOD)
plan to take over Kabel Deutschland Holding AG (KD8.XE).
Write to Archibald Preuschat at archibald.preuschat@wsj.com
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