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BRUSSELS, Dec 20 (Reuters) - EU antitrust regulators openedon Friday an in-depth probe into Telefonica's proposed 8.6 billion euro ($11.9 billion) takeover of KPN's German unit, saying the deal may reduce competition inthe German mobile market.
Spanish telecoms provider Telefonica's takeover of KPN'sE-Plus will put it on par with market leaders Deutsche Telekom and Vodafone..
"At this stage, it cannot be excluded that the reduction inthe number of competitors following the merger would increasethe likelihood that MNOs (mobile network operators) willcoordinate their competitive behaviour and increase prices," theEuropean Commission, which acts as the EU's competitionwatchdog, said in a statement.
The European Commission set a May 14 deadline for itsdecision. Reuters had reported on Dec. 12 that the EU watchdogwould examine the case in detail.
The case is crucial for the European telecoms industry,which sees itself in need of consolidation but is wary ofcompetition regulators demanding onerous concessions to ensure alevel playing field among fewer players.
In 2012, the Commission allowed Hutchison to buyOrange's Austrian unit on the condition that theywould help new operators to enter the market.
According to Citigroup analysts, Telefonica and KPN willneed to make some significant concessions to get regulatoryapproval.
"We expect Telefonica Deutschland/E-Plus will be mandated tooffer some form of a wholesale reference offer to be availableto (mobile virtual network operators) MVNOs/service providersand on a national roaming basis (in case a new entrantemerges)," they wrote in a client note.
EU regulators may want a fourth mobile operator to boostcompetition as the deal reduces the number of mobile providersin Europe's biggest market from four to three, technology andtelecoms consultant firm Rewheel said in a note last month.
