Vodafone Faces Expanded EU Probe on Mobile Payment System

Vodafone Group Plc, Telefonica SA’s O2, and Everything Everywhere Ltd are facing an expanded probe by European Union regulators examining their U.K. mobile-phone payment system.

The European Commission extended until Aug. 27 its deadline to rule on the deal, it said in an e-mailed statement today. Regulators cited concerns that the companies may be able to block competitors from offering their own “mobile wallet” services to U.K. customers or to “degrade the quality” of services to make them less attractive.

“We need to make sure that competing services can keep emerging on this market, so that incentives to innovate remain and customers get the best mobile commerce services at the best cost,” EU Competition Commission Joaquin Almunia said.

The U.K.’s three largest mobile operators are seeking EU approval for the joint venture to help banks and advertisers access services which will allow people to buy items from groceries to clothes with their smartphones.

After losing out to Apple Inc. and Google Inc. in offering online application stores, the companies want to accelerate the development of additional services to drive revenue and boost smartphone sales.

“The shareholders in the proposed joint venture remain focused and determined to progress with the project,” the three companies said in a joint statement. “We remain confident that an extended review will conclude that the proposed joint venture is pro-competitive and will provide robust competition.”

The joint venture would have “very high market shares” in growing markets for mobile-payment applications, mobile advertising and data-analytic services, regulators said, as Bloomberg stated.

The EU agency is “wary” of efforts that may exclude rivals in its review of “joint ventures established by telecoms operators to offer new mobile-supported services such as payments and advertising,” Almunia said last month.

“The demand for these services is virtually non-existent at present. We have this mass of people trying to service a market that doesn’t exist at the moment,” said Alistair Newton, an analyst at Gartner Inc. in London.

Consumers may spend as much as $50 billion worldwide using their mobile phones by 2014 through a technology called near- field communications, Juniper Research said in June. There were 7.1 million mobile-payment users in Western Europe in 2010, compared with 62.8 million users in the Asia-Pacific region, the commission said, citing estimates from Gartner.

Hutchison Whampoa Ltd. (13)’s Three unit last year raised concerns with the EU over its potential exclusion from the U.K. mobile-phone payment venture set up by its bigger rivals. Verizon Wireless, the largest U.S. wireless carrier, last year blocked Google’s competing mobile-payment system from the new Galaxy Nexus Smartphone from Samsung Electronics Co., citing security concerns.

Hugh Davies, Three’s director of corporate affairs, said the proposed joint venture “raises serious competition concerns” and Three was “pleased” the EU would investigate the deal’s effect on consumers and the future development of mobile payments.

Europe has missed out on the “most promising” mobile- phone payment initiatives because the region lacks a regulatory framework for the technology, EU regulators have said, citing initiatives by Google, Apple and Visa Inc. Visa and Visa Europe Ltd. said last year they had agreed to license mobile-payment technology to Google to be incorporated into its design of a new Smartphone.