Liberty Media, the US cable group headed by John Malone, had abandoned plans to take a stake in the pay-TV unit of Germany's Kirch Group in an effort to satisfy anti-trust regulators, but the move does not seem to have been enough.
According to reports, the German Cartel Office is said to have demanded that Liberty upgrades the cable networks so they would be capable of delivering high-speed internet services. Liberty balked at this proposal and said it saw no business case for such an upgrade.
The Cartel Office is also understood to have told Malone's lawyers that it would have difficulty in approving the deal because of competition laws, which prevent a single telecom company from owning the network's backbone and the last mile.
According to a Liberty Media statement: "We are reviewing the statement by the Cartel Office to determine whether we can satisfy the concerns that have been raised in a manner consistent with a sustainable business plan and capital structure that would provide appropriate returns to our shareholders."
Malone has been pushing hard to get the deal through. At the end of last year, Malone met German chancellor Gerhard Schroeder to discuss the development of the country's communications networks. It is thought that he would have indirectly tried to promote his case for foreign investment in Germany's networks.
Deutsche Telekom is 43% owned by the German government, which will seek to continue to divest its stake through secondary offerings. The company needs the money from the sale to help cut its £40.6bn debt mountain.
Liberty is also pursuing News Corporation's 22% stake in Kirch Pay-TV, which, if agreed, would provide content for the cable network.
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