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European antitrust regulator douses telco industry hopes of merger leniency

By Foo Yun Chee

BRUSSELS (Reuters) - A senior European Commission official suggested regulators would not be swayed by requests from telecoms companies for more leniency in assessing mergers, saying there was no guarantee that bigger companies would result in more investment.

Cecilio Madero, deputy director-general for antitrust at the European Commission, told a conference on Thursday: "Frankly speaking, we do not have evidence that operators will invest more if they reach a bigger size as long as markets will remain fragmented and along national borders."

Telecoms companies are struggling to find the resources to pay for new infrastructure as demanded by the surge in data-heavy smartphones and tablets.

After four straight years of revenue declines and ferocious competition, they have been lobbying European Union regulators to look more kindly on mergers that would enable them to find funds.

Operators such as Vodafone, France Telecom-owned Orange and KPN have said companies need to scale up via mergers to meet the need for investment in networks and that regulators should be more flexible with deals.

Lobbying group the European Telecommunications Network Operators' Association (ETNO), which organised the conference, said the gloomy outlook in the sector in Europe, compared with upbeat prospects in Asia and North America, called for a change in EU competition policy.

"In reality, competition has shifted from the national level, and indeed from European level, to the global arena," ETNO head Luigi Gambardella told the conference.

But the EC's Madero said: "What we cannot do in any event is to give some companies a sort of blank check to consolidate within their national borders and increase prices for consumers on the basis of mere promises of further investments."

(Reporting by Foo Yun Chee; Editing by Sophie Walker)

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