The president of Germany's Federal Network Agency Tuesday defended the way Germany aims to hold its mobile spectrum auction, but the EU Commission said the plans are anticompetitive.

The German agency's advisory council Monday asked that the European Union Commission's concerns about a possible distortion of competition be dismissed.

The procedure is open, transparent and not discriminating, Matthias Kurth said. This was not "self-evident" because there was wider criticism regarding the modalities of the auction, Kurth said.

But the European Union Commission in a statement Tuesday said it's "deeply concerned about the German telecoms regulator's decision to ignore the Commission's advice on how to ensure fair competition in the allocation of the digital dividend in Germany". The EU's executive arm said it will have to study the details of the German decision before deciding on its course of action.

Germany's Federal Network Agency Bundesnetzagentur will auction different frequencies, the most important of which is the 800 megahertz band.

T-Mobile and Vodafone Germany already have a much broader spectrum in the 900 megahertz band and have now the opportunity for two more blocks, five megahertz each. Telfonica SA's (TEF)o2 and Royal KPN NV's (KPN.AE) E-Plus, which mostly use the 1800 megahertz band at present, can bid for three blocks.

In explaining its opposition to the German decision, the EU Commission said national regulators in the 27-nation bloc are not allowed to freeze competitive market situations for the benefit of incumbent operators.

"In Germany, subsidiaries of Dutch and Spanish telecoms operators are arguing with two incumbent operators about the proper allocation of valuable radio frequencies," hence this case is clearly about the rules of the game on Europe's single market, the EU Commission statement said.

"There will be more demand than there is available spectrum, on one hand meaning higher proceeds for the German government but on the other hand making it likely that one of the four players will be left empty-handed," Aapo Markkanen, analyst of IHS Global Insight said.

Analysts estimate that the auction will bring more than EUR4 billion into the German treasury's coffers.

An E-Plus spokesman reiterated Tuesday prior statements that it will take legal action against the auctions rules.

A spokesperson for o2 said the group is evaluating its position and may take legal steps while spokesmen for T-Mobile and Vodafone welcomed the German decision on auction rules.

The federal network agency is the German regulatory office for the telecommunications, postal services, electricity, gas, Internet services and train markets.

Company Web site: www.bundesnetzagentur.de

-By Archibald Preuschat and Philipp Grontzki, Dow Jones Newswires; +49 211 13872 18; archibald.preuschat@dowjones.com

(Peppi Kiviniemi in Brussels contributed to this story.)