The Swiss regulator yesterday blocked a planned merger of France Telecom's Orange and Danish-owned telecoms firm TDC's Sunrise on the ground that the merger would create a ''dominant position'' and reduce consumer choice.

Switzerland's regulator, The Competition Commission (COMCO) blocked the merger since it would have created a dominant player in the mobile telephone market alongside top Swiss telecoms provider Swisscom, leaving the country with just two operators.

Paris-based France Telecom, the third-largest telecom operator in Europe and one of the largest in the world, had agreed in November 2009 to merge its Swiss operations with Denmark's TDC's Swiss arm Sunrise, by paying €1.5 billion to TDC, with France Telecom holding 75 per cent stake in the combined entity, and TDC holding the remaining 25 per cent.

The merger would have created a company with €2 billion in revenues and approximately 3.4 million mobile and 1.1 million fixed and broadband subscribers, accounting for 38 per cent of the mobile telephony market and 13 per cent of the fixed broadband connections in Switzerland.

But the rejection by COMCO has come as a huge surprise for analysts since the country's largest telecom operator Swisscom, controlled by the Swiss government, has a 62-per cent market share of the mobile telephony market, 24 per cent less that the proposed merger of France Telecom and Sunrise.

The European telecom market is already on a consolidation drive with the UK regulator having approved the merger of France Telecom and Deutsche Telekom late last year. (See: Deutsche Telekom and France Telecom UK arms to merge)

The merger was approved although the combined companies will become the UK's leading mobile operator with a customer base of around 28.4 million and a market share of around 37 per cent, ahead of their largest rivals - Spanish group Telefonica's holding 27 per cent and Vodafone's 25 per cent market share.

France Telecom and TDC said that they are disappointed and surprised by this decision as they strongly believe that the contemplated combination and the substantial commitments that they had proposed to undertake would have benefited the Swiss consumer.

''The combined entity would be in the position to significantly invest in its networks and enhance customer experience. Identified synergies of such combination would enable the combined entity to offer more attractive prices and innovative products and services, as well as an enhanced access to a worldwide network,'' they said in a statement.

They also said that without this combination, Swisscom's dominant position in the Swiss telecommunications market would be maintained.

France Telecom and TDC said that they will assess their available options regarding potential next steps and are likely to appeal the ruling.