Brussels fires warning shot at Vodafone bid for Mannesmann

BRUSSELS YESTERDAY raised the stakes in the pounds 77bn bid battle between Vodafone AirTouch and Mannesmann by warning that it could block the deal unless the UK bidder proves the takeover is in the interests of European consumers.

Erkki Liikanen, the European Commissioner for Enterprise, warned that the EC's competition authorities would only approve the takeover if its wider benefits could be demonstrated. Speaking at a conference in Helsinki he said: "Our competition authorities will not allow markets to centralise in ways that do not benefit consumers." He said that to be successful, the Vodafone bid "must offer improved services for consumers".

His comments came as Downing Street sought to take some of the heat out of the situation by denying that Britain and Germany were on a collision course and Chris Gent, Vodafone's chief executive, claimed he was on course for victory.

Mr Liikanen's remarks go far beyond what the EC's Competition Commissioner, Mario Monti, has so far said. They would also appear to add a whole new dimension to the EU's policy on takeovers, which is to block them if they are anti-competitive, rather than clear them provided they are pro-competitive.

Tackled yesterday on the EC's stand on Vodafone's bid, Mr Monti would only say that it had to be studied carefully because of the size of the two companies. "I think there will obviously be a notification to the Commission about the proposed merger and we will have to assess the situation and consider possible undertakings and possible competition concerns," he said.

If Brussels were to attempt to veto the takeover there would be a huge backlash in Britain. Vodafone and Mannesmann compete in very few areas and where they do both have a presence in a country it is usually as shareholders in the same mobile phone operator.

Downing Street, meanwhile insisted that Tony Blair and Gerhard Schroder, the German Chancellor, were agreed that shareholders should decide on the outcome of the bid.

"The Prime Minister would agree with Schroder that this is something that will be sorted out at corporate level. In the end it is a matter for shareholders."

There were reports yesterday that Mr Schroder was urging the Commission to introduce a long-delayed directive on takeovers that would require hostile bidders to offer minority shareholders a choice of cash or paper, which could frustrate Vodafone's all-share offer. However, EU sources pointed out yesterday that EU member states had three years to implement it.

Mr Gent expressed confidence last night that he was on course for victory, saying in Frankfurt: "At the moment it looks like we're going to beat 50.1 per cent quite handsomely." He said Vodafone has talked to between 20 and 25 per cent of Mannesmann shareholders, some of whom are Vodafone shareholders, and that those investors showed interest in the 232 euros- a-share offer.

Mannesmann stock fell another 5.1 euros to 188 euros, increasing the gap between its market price and the value of Vodafone's offer to 23 per cent.

Mannesmann will today bring forward the announcement of its nine-month results and detail plans for the demerger of its engineering and automotive divisions next spring.