By Foo Yun Chee
BRUSSELS (Reuters) - Vodafone's <VOD.L> purchase of Liberty Global's <LBTYA.O> assets in Germany and east Europe may damage competition in Germany and the Czech Republic, EU antitrust regulators said on Tuesday, as they opened a full-scale probe into the $21.8 billion (£17.13 billion) deal.
The deal between the world's second-largest mobile operator and U.S. cable pioneer John Malone's Liberty would enable Vodafone to compete more effectively with Deutsche Telekom <DTEGn.DE> in the German rival's home market.
It also expands Vodafone's reach in broadband, cable and mobile services elsewhere in Europe as it includes Liberty Global assets in the Czech Republic, Hungary and Romania.
The European Commission said some rivals might be shut out of the Czech market, where Vodafone offers mainly mobile telephony services and Liberty Global offers fixed services.
In Germany, the deal might reduce competition in the retail fixed telecoms markets and retail TV markets, curb investments in next-generation networks and give the merged firm more power as a TV broadcaster, the EU competition enforcer said.
It saw no issues in Romania and Hungary and said it will decide whether to clear the deal by May 2. The deadline can be extended if Vodafone offers concessions.
Reuters reported on Nov. 30 that the watchdog was set to launch a full-scale probe into the deal.
Vodafone said it still expected EU approval by mid-2019.
"On balance, we conclude based on the language in the press release that this transaction remains on track for a Phase II approval and closing," Bernstein wrote in client note.
The telecoms industry is hoping for a lighter regulatory touch from the Commission after it cleared without conditions Deutsche Telekom's bid to acquire Tele2's <TEL2b.ST> Dutch business despite earlier qualms.
Telefonica Deutschland, which has called for the deal to be blocked, said it expected Vodafone to make every effort to avert the negative effects singled out by the Commission.
(Reporting by Foo Yun Chee, additional reporting by Douglas Busvine in Frankfurt; Editing by Gabriela Baczynska, Edmund Blair and Alexander Smith)