The European Commission said the combined company would not use its market power to squeeze out rivals.

"The merged entity would continue to face significant competition from other players such as the incumbent A1 Telekom Austria and Hutchison Drei Austria," the EU executive said.

The acquisition will help Deutsche Telekom better compete with local incumbent Telekom Austria with its 1.5 million fixed-line broadband subscribers versus 500,000 for Liberty Global's UPC Austria.

(Reporting by Foo Yun Chee; editing by Robert-Jan Bartunek)