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Telefonica offers spectrum to rivals for E-Plus deal: sources

By Foo Yun Chee and Julien Toyer

BRUSSELS/MADRID (Reuters) - Spanish telecoms operator Telefonica has offered to lease spectrum and access to its network to rivals in a bid to win European Union approval for its planned purchase of KPN's E-Plus unit in Germany, three sources said on Tuesday.

The company's aim is to create a fourth mobile operator in Germany to allay regulatory concerns that its E-Plus deal will reduce the number of competitors in Europe's biggest market, said one of the people with knowledge of the matter.

Telefonica declined to comment.

The 8.6-billion-euro ($11.9 billion) deal is seen as key for the telecoms industry which wants more mergers to offset falling revenues, with some executives warning against onerous demands from regulators in return for their approval.

Telefonica is offering to lease frequency spectrum in the bandwidth above 2 Gigahertz to mobile network operators, with the proposal covering 100 cities in Germany, one of the sources said, speaking on condition of anonymity.

It has also pledged to give mobile virtual network operators (MVNO), which run services over the networks of rivals, access to the existing network of the combined company.

Telefonica also offered to give for free 10 percent of the mobile data network of the merged company to MVNOs, a second person familiar with the matter said.

A third source said it was not clear whether Telefonica's proposed concessions would be enough to soothe the European Commission's concerns.

The source said informal discussions that took place between Telefonica and the Commission over the last few weeks were "tough", with Brussels forcing the Spanish company to improve its preliminary offer.

The Commission has given third parties until Thursday to provide feedback on the proposal. It has set a June 23 deadline for its decision.

E-Plus competes with German market leaders Deutsche Telekom and Vodafone.

($1 = 0.7238 Euros)

(Editing by Mark Potter)

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