France Telecom (News - Alert) announced it was "disappointed and surprised" by Swiss Competition Commission's decision to block the merger between the Swiss units of France Telecom and Danish peer TDC A/S.
In November France Telecom and Danish operator TDC had agreed to merge their Swiss subsidiaries. Through this merger, the French operator plans to consolidate its European operations, in part to fend off slowing growth and more aggressive price competition, according to company officials.
Under the deal with TDC, France Telecom would have had an option to buy the rest of its Swiss operations for 1.2 billion euros, company officials said.
On April 22, the company announced that proposed merger has been rejected by the Commission.
According to the Swiss regulator, the merger, if happens, would "undermine market dynamics in the country's mobile phone market and hurt consumer interests."
Reacting to this, the company said it still believes that the proposed combination, which would have created the second-largest player in Switzerland, would have "benefited the Swiss consumer."
Without the proposed merger, Swisscom AG (News - Alert) will continue to dominate the market, France Telecom said. Swisscom AG currently owns 62 percent share in Switzerland's multibillion mobile telephone market.
"Together with Swisscom, the merged company would have a market-dominating position in the Swiss mobile telephony market," the regulator said after announcing their decision to block the deal. The Commission also said, "It would be more advantageous for the merged entity and Swisscom to maintain a relatively high pricing level under the planned circumstances."
Following this announcement, the shares of France Telecom and Swisscom slipped 0.6 percent and 0.8 percent in their respective markets
France Telecom and TDC are currently assessing their available options, company officials said. Industry analysts say the companies are likely to file appeal against the decision of the regulator.
As part of the company's European consolidation plan, France Telecom earlier merged its mobile operations in the U.K. with those of Deutsche Telekom's T-Mobile, creating a stronger rival to Vodafone Group and Telefonica's (News - Alert) O2.
Rajani Baburajan is a contributing editor for TMCnet. To read more of Rajani's articles, please visit her columnist page.
Edited by Erin Harrison