European Commissioner for telecommunications and industry, Martin Bangemann, said that a proposed merger between Deutsche Telekom and Telecom Italia is "not impossible" if the global market is taken into consideration.
Speaking at a news conference after a meeting of EU telecom ministers in Luxembourg, Bangemann said that the competition problems created by such a merger could be overcome, but the situation would have to be "examined carefully".
"The question of how companies operate on the market and what position they try and build up is one of the factors showing whether liberalisation has led to the right result. But this does not detract from whether DG4 [the commission's competition directorate], should examine if this merger is acceptable," he said.
"Industry conditions will play a role. We're talking about a global market, and if so, competition policy has to take the worldwide market as the relevant one. If you see the relevant market as the global market, then some of the problems that might arise for other companies in Europe might be less important," he said.
Bangemann said looking at the relevant market and whether companies can gain a dominant position were the most important factors when examining competition issues and that whether a company was state owned or not was a secondary matter.
Werner Muller, German federal minister for economy and technology said the federal government, which has a majority stakeholding in Deutsche Telekom, will be divesting this in the near future.
"We can't divest ourselves quickly - not because we want to have an influence and use our status as a majority shareholder to interfere with the operation, but because we will incur losses if we divest quickly," he said.
Bangemann said that a merger between Deutsche Telekom and Telecom Italia would lead to a merged group with the second largest sales of a telecommunications company in the world and with the largest balance sheet.
"As an overall prima facie, I can't say that the creation of such a company is impossible," he said.
A commission spokesman said that viewing telecommunications as a global market would certainly make it easier for the merger to go ahead.
On Tuesday, European competition commissioner Karel Van Miert said the commission is likely to open an in depth investigation of the merger, which can lead to divestments, and he was concerned by the merger of two large incumbents, with a link to a third, France Telecom.
Another commission source said divestment by Deutsche Telekom of its stake in Italian mobile and fixed operator, Wind, would be required.
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