Telecom operators TeliaSonera and Telenor have dropped plans to merge their Danish businesses, saying that they could not agree terms with Europe's new competition commissioner.
The move will raise concerns for bigger deals in other European mobile markets which are awaiting approval.
EU commissioner Margrethe Vestager said that the two Nordic firms had not done enough to allay her concerns that reducing the number of mobile network operators in Denmark from four to three would have damaged competition.
"What we were looking at were very serious concerns. To me it was necessary to have a fourth mobile operator," European Competition Commissioner Vestager said.
However, Vestager said there should be no conclusions drawn with regard to the two merger deals in Italy and Britain which she will examine in the coming months and would also reduce the number of local network operators to three from four.
In Britain, Hutchison Whampoa has agreed to buy Telefonica's mobile unit O2 UK and in Italy, Hutchison has agreed a merger of its 3 Italia with Vimpelcom's Wind Telecommunicazioni in a joint venture.
Analysts said the major sticking point was that Teliasonera and Telenor could not find a company willing to become the new competition that the regulators wanted to create via remedies.
TeliaSonera and Telenor announced their Danish merger deal last December, saying the combination would boost margins in their toughest market.
Following objections from the regulators the two had offered to sell up to 40% of a network infrastructure unit, according to a European Commission document seen by Reuters.
TeliaSonera's chief financial officer Christian Luiga said the operator had come up with several proposals but could not go further as there would not have remained enough economic value for them.
Analysts were surprised by the dropped merger plans.
"It's surprising given that the European Union has approved other four-to-three mergers," said Handelsbanken Capital Markets analyst Thomas Heath, referring to approvals given by Vestager's predecessor to such deals in Austria, Ireland and Germany.
