EU investigating Spain's Telefonica, Portugal Telecom

The European Commission, the EU antitrust watchdog, said today that its investigation will not cover Telefonica's acquisition of PT's 50 per cent stake in their Brazilian joint venture, mobile telecoms firm Vivo , last year.

"The European Commission has opened a formal investigation to ascertain whether the Spanish and Portuguese telecoms incumbents ... have breached EU rules by agreeing not to compete with each other in their respective home markets," the European Union executive said in a statement.

"The Commission will also investigate whether the non-compete agreement pre-dates the Vivo deal, which is not concerned by this probe," it said.

The regulator said it had a copy of the agreement containing the non-compete clause, which runs from September 2010 to the end of this year. It will also check if there is a similar clause in a 1997 cooperation deal.

PT said it was ready to clarify the facts.

"The existence of partnerships (with Telefonica) has never prevented the two companies from developing normal activities, and competing between themselves, in the markets where they are present," a PT spokesman said.

Telefonica shares were trading 0.2 percent up at 18.40 euros by 12:58 p.m. British time, underperforming a 0.5 percent higher Stoxx 600 telecoms index while PT was 0.1 percent lower at 8.45 euros.

The Commission can fine companies up to 10 percent of their global turnover for breaching EU rules though it rarely reaches that level.