UPDATED 4.30PM: Telenor and TeliaSonera dropped plans to merge their Danish operations, having been unable to accommodate the European Commission’s demand for a fourth operator.

The setback will likely send shockwaves through the boardrooms of a few operators around Europe either in the process of merging, or eyeing such an opportunity.

TeliaSonera and Telenor were keen on a merger to consolidate the Danish market but a statement by Competition Commissioner Margrethe Vestager laid bare her concerns:

“Every case has to be assessed on its own facts and merits. In this specific case, based on the Commission’s in-depth analysis and evidence gathered, we are convinced that the significant competition concerns required an equally significant remedy,” said Vestager.

“This means the creation of a fourth mobile network operator. What the parties offered was not sufficient to avoid harm to competition in Danish mobile markets,” she added.

Clearly setting aside spectrum for an enhanced MNO or MVNO, a standard remedy, would not have been sufficient. Vestager’s statement also explains an unusual offer made by TeliaSonera and Telenor, which leaked earlier this week. The two offered to sell a minority stake in the combined entity’s infrastructure unit to a new entrant.

Under this proposal, a new entrant would have been a quasi operator but sitting on infrastructure majority controlled by TeliaSonera and Telenor. Critically, the newcomer would not have owned spectrum. Clearly the offer did not convince Vestager.

“We worked to the bitter end with EC. We got creative on remedies, but it still wasn’t enough,” acknowledged TeliaSonera CFO Christian Luiga on a call.

Industry analysts were quick to comment on the potential implication of today’s news. “The Danish collapse could raise question marks over other Euro deals to be assessed (eg 3/O2) or the possibility of future deals being made,” tweeted CCS Insight’s Kester Mann.

And IDC’s John Delaney agreed: “The EU is getting tougher on mergers in countries with four mobile operators. Worrying for 3 in Italy and UK.”

Meanwhile, the GSMA described the deal’s failure as “a disappointing development for an industry in need of greater consolidation”.

In a statement, John Giusti, deputy chief regulatory officer at the trade association, commented: “While each individual proposed merger is different, it would appear that the post-completion market concentration levels in Denmark would not be dissimilar to those seen in mergers in Austria, Germany and Ireland, all of which were recently cleared. The failed merger marks a disappointing reversal in a recent trend towards consolidation to foster investment and innovation in European mobile markets.”

Next moves?
The two operators now need to decide their next moves. A bullish statement from Kjell Morten Johnsen, Executive Vice President and Head of Telenor Region Europe, sounded like business-as-usual: “Telenor and TeliaSonera will continue to compete and deliver products and services in the Danish market through our respective original, and still fully up-and-running Danish operations.”

However, TeliaSonera’s Luiga said his company was open to alternatives after the failure of the jv bid.

And a joint statement confirmed that ideas will be weighed up: “Telenor and TeliaSonera now continue to review the strategic options in the Danish market.”