Proposed and notified transactions
BT's acquisition of EE is fast-tracked to a Phase II investigation
In our last Bulletin we reported on an invitation to comment issued by the CMA, the UK's competition authority, with respect to the proposed acquisition of mobile network operator, EE, by the UK's incumbent telecoms provider, BT Group. The transaction has now been notified to the CMA by BT, who also submitted a request for a fast-track reference to an in-depth, Phase II investigation. A transaction will be fast-tracked to Phase II following a request from the notifying parties where the CMA believes that it has sufficient evidence to demonstrate that there is a realistic prospect of a substantial lessening of competition in relation to the markets affected by the transaction - in this case the supply of:
- whole access and call origination services to mobile virtual network operators; and
- fibre mobile backhaul services to mobile network operators in the UK.
On the 9 June 2015 the CMA published its decision to fast-track the transaction to Phase II thereby substantially shortening the length of the Phase I investigation - the statutory deadline for the conclusion of which was 14 July 2015. The Phase I decision can be viewed on the CMA's website. The CMA now has until 23 November 2015 to conclude its Phase II investigation, during which third parties will have an opportunity to present their views on the transaction.
Those affected by the proposed transaction will also be keeping a close eye on the recently announced acquisition of O2 UK by Hutchinson Whampoa ("3/O2 transaction", for more details see below). Both transactions concern mobile network operators active in the UK and have been identified by the CMA as so-called 'parallel transactions' - two separate transactions which take place in the same market, at the same time. Parallel transactions may affect how a competition authority reviews the notified transaction before it - even where, as with the 3/O2 transaction, the second transaction is yet to be notified.
In the UK, at Phase I, the CMA is likely to consider whether there is a realistic prospect of a substantial lessening of competition on the affected markets whether or not the parallel transaction proceeds. The CMA followed this approach in the BT/EE Phase I decision, where on the most cautious basis of review it assessed the proposed transaction against market conditions which assumed that the 3/O2 transaction had obtained unconditional clearance. This meant that the BT/EE transaction was assessed against a market where the number of mobile network operators active on the UK market was reduced from 4 to 3 (see paragraphs 38 - 47, Phase I decision) leaving only Vodafone, EE and the 3/O2 merger entity. At Phase II the CMA has a fairly wide discretion over how to treat parallel transactions in its competitive assessment.
Hutchinson Whampoa agrees to acquire the UK's O2 Network
Hutchinson Whampoa Limited, parent company of UK mobile network operator Three, has agreed to acquire Telefónica's UK mobile network operator subsidiary, O2 UK ("3/O2 Transaction"). The transaction is conditional upon obtaining regulatory clearance and is not expected to complete until 2016. Although the transaction has not yet been notified to any competition authority it has been reported that the transaction is likely to be reviewed by the European Commission - no doubt on account of the parties' substantial combined worldwide turnover, which would bring the transaction within the Commission's jurisdiction.
However, review by the Commission is not a given - the CMA could submit a request to the Commission for the transaction to be referred to the UK for review on the basis that the transaction predominantly affects consumers in the UK. This debate is likely to be played out in the coming months, but those favouring review by the UK authority should be cautious - the Commission's recent history has proven that it is reluctant to give up jurisdiction of telecoms mergers, preferring instead to use its position to ensure consistency on the telecoms markets throughout the EEA (see Altice/Portugal Telecom below for more details).
Commission issues Telenor and TeliaSonera with Statement of Objections
The proposed joint venture between Danish operators Telenor and TeliaSonera, notified to the Commission in February 2015, is now subject to an in-depth, Phase II investigation. The proposed transaction would combine mobile telecommunications services provided by Telenor and TeliaSonera, who are currently the second and third largest operators on the mobile retail market in Denmark. The transaction would create the largest player on the market in terms of revenue and subscribers and reduce the number of mobile network operators in Denmark from four to three.
The Commission has stated that it is concerned that the transaction will reduce the incentives to compete for both the merged entity and its competitors, and ultimately this could lead to higher prices, loss of innovation and lower quality on the Danish retail mobile telecommunications market. The Commission issued a statement of objections in relation to its investigation on 23 June 2015 and the statutory deadline for the Commission's final decision on the transaction is 2 September 2015.
Recently completed investigations
Orange's acquisition of Jazztel cleared by the Commission
In our last Bulletin we provided an overview of the proposed acquisition by Orange of Jazztel, which was subject to an in-depth, Phase II investigation.
The acquisition has now been cleared by the Commission, subject to commitments given by Orange. The commitments address the Commission's concerns about the effect of the acquisition on the fixed internet access market in Spain and require Orange to divest its Fibre to the Home (FTTH) networks in Barcelona, Madrid, Malaga, Seville and Valencia. Orange is also required to provide wholesale access to Jazztel's ADSL network for an initial period of four years.
The Commission found that in the absence of such commitments, the proposed merger would significantly decrease competition as it would result in reduced incentives for the merged entity to compete, higher barriers to the market for new entrants, and a decline in consumers' negotiation power.
The Commission approves Altice/Portugal Telecom transaction
In the last Bulletin we reported that the Portuguese competition authority had requested a referral from the European Commission so that it could assess the parts of the Altice/Portugal Telecom transaction concerning Portuguese assets. As anticipated, the Commission dismissed this request - this is in line with the Commission's past approach with respect to the telecoms sector and is the fifth rejection of a referral request in the last three years. As in previous cases, the Commission reasoned that it was better placed to assess the transaction's impact on competition because of its extensive experience in such matters and its ability to ensure a consistent application throughout EEA markets.
The transaction has now been cleared by the Commission, subject to Altice divesting its current Portuguese subsidiaries ONI and Cabovisão and thus removing the business overlap between Altice and PT Portugal within Portugal. The agreed commitments address the Commission's concerns that the originally notified merger would have led to higher prices and reduced competition in several Portuguese markets, such as the wholesale markets for leased lines and the market for fixed internet access services.