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Telefonica gets out of Freemove as it swallows O2, with EU blessing

The European Commission has cleared Telefonica's takeover of O2, Eurocrats announced Tuesday - providing Telefonica abandons the Freemove alliance of 'mutual roaming' operators.

Although it agreed to give the deal the necessary rubber stamps, the Commission had raised concerns that the buy-out might jeopardise competition for international roaming charges.

That's because both Telefonica and O2 belong to different industry groups that co-operate on roaming enabling punters to use their mobiles overseas as if they were at home.

Along with incumbents France Telecom, Telecom Italia and Deutsche Telekom, Telefonica is part of the so-called FreeMove alliance.

O2, on the other hand, is part of the Starmap alliance made up of smaller telcos.

This, said the Commission, "gave rise to competition concerns on the market for international roaming services" because O2 would most likely join the big boys at FreeMove and "O2 would in all probability be less ready to exchange international roaming traffic with non-FreeMove members".

To resolve this potential problem, Telefonica has agreed to leave FreeMove.

Or as the Commission put it: "To address the Commission's concerns and in order to avoid an in-depth investigation, Telefonica committed itself to leave the FreeMove alliance as soon as possible and not to re-enter that alliance without the Commission's prior consent in the coming years.

"With the termination of its alliance membership the serious doubts outlined above are removed and the Commission can approve the merger."

In October last year O2 agreed to be bought by Telefonica for ?18bn as the Spanish telco looks to expand its operations into UK and Germany.

Mobile outfit O2 - which split from BT in 2001 - will retain its bubbly brand and keep its HQ in the UK.

Tags: O2, telefonica, Starmap Alliance, FreeMove Alliance and roaming.

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