# C_2015086EN.01001001.xml

| 13.3.2015 | EN | Official Journal of the European Union | C 86/10 |
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13.3.2015

EN

Official Journal of the European Union

C 86/10

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Summary of Commission Decision

of 2 July 2014

declaring a concentration compatible with the internal market and the functioning of the EEA Agreement

(Case M.7018 — Telefónica Deutschland/E-Plus)

(notified under document C(2014) 4443)

(Only the English version is authentic)

(2015/C 86/07)

On 2 July 2014 the Commission adopted a Decision in a merger case under Council Regulation (EC) No 139/2004 of 20 January 2004 on the control of concentrations between undertakings
   (1)
  , and in particular Article 8(2) of that Regulation. A non-confidential version of the full Decision can be found in the authentic language of the case on the website of the Directorate-General for Competition, at the following address: http://ec.europa.eu/comm/competition/index_en.html

On 2 July 2014 the Commission adopted a Decision in a merger case under Council Regulation (EC) No 139/2004 of 20 January 2004 on the control of concentrations between undertakings

1

, and in particular Article 8(2) of that Regulation. A non-confidential version of the full Decision can be found in the authentic language of the case on the website of the Directorate-General for Competition, at the following address: http://ec.europa.eu/comm/competition/index_en.html

I.   THE PARTIES

THE PARTIES

| (1) | Telefónica Deutschland Holding AG (‘Telefónica’ or the ‘Notifying Party’) and E-Plus Mobilfunk GmbH & Co. KG (‘E-Plus’, together with Telefónica the ‘Parties’) are two of the four mobile network operators (‘MNOs’) present on the retail mobile telecommunications services market and the wholesale market for access and call origination in Germany. The transaction would lead to a market structure with three MNOs (Deutsche Telekom, Vodafone and the merged entity) with similar market shares in terms of revenues. Besides these MNOs, there are some mobile virtual network operators (‘MVNOs’) and several Service Providers active in the retail market. |
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(1)

Telefónica Deutschland Holding AG (‘Telefónica’ or the ‘Notifying Party’) and E-Plus Mobilfunk GmbH & Co. KG (‘E-Plus’, together with Telefónica the ‘Parties’) are two of the four mobile network operators (‘MNOs’) present on the retail mobile telecommunications services market and the wholesale market for access and call origination in Germany. The transaction would lead to a market structure with three MNOs (Deutsche Telekom, Vodafone and the merged entity) with similar market shares in terms of revenues. Besides these MNOs, there are some mobile virtual network operators (‘MVNOs’) and several Service Providers active in the retail market.

II.   THE OPERATION

THE OPERATION

| (2) | On 31 October 2013, the Commission received a formal notification pursuant to Article 4 of the Merger Regulation by which by which Telefónica acquires within the meaning of Article 3(1)(b) of the Merger Regulation, sole control over E-Plus from Koninklijke KPN N.V. (‘KPN’). |
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(2)

On 31 October 2013, the Commission received a formal notification pursuant to Article 4 of the Merger Regulation by which by which Telefónica acquires within the meaning of Article 3(1)(b) of the Merger Regulation, sole control over E-Plus from Koninklijke KPN N.V. (‘KPN’).

| (3) | Germany requested via the Bundeskartellamt on the basis of Article 9(2)(a) of the Merger Regulation, a referral of the proposed transaction from the Commission to Germany. The Commission adopted a decision rejecting the referral request. |
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(3)

Germany requested via the Bundeskartellamt on the basis of Article 9(2)(a) of the Merger Regulation, a referral of the proposed transaction from the Commission to Germany. The Commission adopted a decision rejecting the referral request.

III.   SUMMARY

SUMMARY

| (4) | Telefónica and E-Plus are two of the four mobile network operators (‘MNOs’) present on the retail mobile telecommunications services market and the wholesale market for access and call origination in Germany. The transaction would lead to a market structure with three MNOs (Deutsche Telekom, Vodafone and the merged entity) with similar market shares in terms of revenues. Besides these MNOs, there are some mobile virtual network operators (‘MVNOs’) and several Service Providers active in the retail market. |
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(4)

Telefónica and E-Plus are two of the four mobile network operators (‘MNOs’) present on the retail mobile telecommunications services market and the wholesale market for access and call origination in Germany. The transaction would lead to a market structure with three MNOs (Deutsche Telekom, Vodafone and the merged entity) with similar market shares in terms of revenues. Besides these MNOs, there are some mobile virtual network operators (‘MVNOs’) and several Service Providers active in the retail market.

| (5) | While the proposed merger would not lead to the creation or strengthening of a (single) dominant position of the merged entity, the decision finds that the merger would nevertheless result in a significant impediment to effective competition on the retail mobile telecommunications market and, potentially, on the wholesale market for network access and call origination in Germany. |
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(5)

While the proposed merger would not lead to the creation or strengthening of a (single) dominant position of the merged entity, the decision finds that the merger would nevertheless result in a significant impediment to effective competition on the retail mobile telecommunications market and, potentially, on the wholesale market for network access and call origination in Germany.

| (6) | To remove these concerns, Telefónica submitted commitments consisting, in their final version, of three elements:






  (a) | First, Telefónica commits to enter into capacity based wholesale agreements with one or several (up to three) Upfront Mobile Bitstream Access MVNOs (‘Upfront MBA MVNOs’) in Germany prior to the closing of the merger. These agreements foresee that the Upfront MBA MVNO(s) can purchase against an upfront payment up to 30 % of the total capacity of the merged company’s network for up to 10 years after the completion of the proposed transaction. This capacity corresponds to a market share of up to 11 %, while Telefónica’s market share is around 15 % today. |
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(6)

To remove these concerns, Telefónica submitted commitments consisting, in their final version, of three elements:

(a)

First, Telefónica commits to enter into capacity based wholesale agreements with one or several (up to three) Upfront Mobile Bitstream Access MVNOs (‘Upfront MBA MVNOs’) in Germany prior to the closing of the merger. These agreements foresee that the Upfront MBA MVNO(s) can purchase against an upfront payment up to 30 % of the total capacity of the merged company’s network for up to 10 years after the completion of the proposed transaction. This capacity corresponds to a market share of up to 11 %, while Telefónica’s market share is around 15 % today.

| (b) | Second, Telefónica commits to extend existing wholesale agreements with Telefónica’s and E-Plus’ wholesale partners and to offer 4G services to the wholesale market in the future. In addition, Telefónica commits to allow its wholesale partners to switch their customers hosted on Telefónica’s and/or E-Plus’ networks from one business model to another without any penalty. Further, Telefónica commits to eliminate the contractual clauses in the agreements with wholesale partners of either Telefónica or E-Plus, which could prevent the MVNOs/Service Providers from switching their customers from one MNO to another. |
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(b)

Second, Telefónica commits to extend existing wholesale agreements with Telefónica’s and E-Plus’ wholesale partners and to offer 4G services to the wholesale market in the future. In addition, Telefónica commits to allow its wholesale partners to switch their customers hosted on Telefónica’s and/or E-Plus’ networks from one business model to another without any penalty. Further, Telefónica commits to eliminate the contractual clauses in the agreements with wholesale partners of either Telefónica or E-Plus, which could prevent the MVNOs/Service Providers from switching their customers from one MNO to another.

| (c) | Third, Telefónica commits to offer an agreement to be concluded with a new MNO entrant or subsequently with the upfront MVNO. According to Telefónica, this remedy is supposed to facilitate the entry of a new fourth MNO into the German market. For this purpose, Telefónica commits to make the following offers: (a) a spectrum offer consisting of the lease of spectrum in the 2,1 GHz band and 2,6 GHz band; (b) a national roaming offer; (c) a divestiture of sites offer; (d) a passive radio network sharing offer; and (e) a sale of shops offer. |
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(c)

Third, Telefónica commits to offer an agreement to be concluded with a new MNO entrant or subsequently with the upfront MVNO. According to Telefónica, this remedy is supposed to facilitate the entry of a new fourth MNO into the German market. For this purpose, Telefónica commits to make the following offers: (a) a spectrum offer consisting of the lease of spectrum in the 2,1 GHz band and 2,6 GHz band; (b) a national roaming offer; (c) a divestiture of sites offer; (d) a passive radio network sharing offer; and (e) a sale of shops offer.

| (7) | In light of these commitments, the Commission concluded that the proposed transaction would no longer raise competition concerns, as the decision is conditional upon full compliance with the commitments. |
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(7)

In light of these commitments, the Commission concluded that the proposed transaction would no longer raise competition concerns, as the decision is conditional upon full compliance with the commitments.

IV.   EXPLANATORY MEMORANDUM

EXPLANATORY MEMORANDUM

A.   The relevant product and geographic markets

The relevant product and geographic markets

| (8) | In compliance with previous Commissions decisions concerning markets for mobile telecommunications services (2) and the Notifying Party’s views, the relevant product markets were delimitated as follows:






  (a) | the market for mobile telecommunications services to end customers (also referred to as the ‘retail mobile telecommunications services market’); |
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(8)

In compliance with previous Commissions decisions concerning markets for mobile telecommunications services (2) and the Notifying Party’s views, the relevant product markets were delimitated as follows:

2

(a)

the market for mobile telecommunications services to end customers (also referred to as the ‘retail mobile telecommunications services market’);

| (b) | the wholesale market for access and call origination on public mobile telephone networks (also referred to as the ‘wholesale market for access and call origination’); |
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(b)

the wholesale market for access and call origination on public mobile telephone networks (also referred to as the ‘wholesale market for access and call origination’);

| (c) | the wholesale market for international roaming; and |
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(c)

the wholesale market for international roaming; and

| (d) | the wholesale market for mobile call termination. |
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(d)

the wholesale market for mobile call termination.

| (9) | The details on the definition of the first two markets, which are primarily and both horizontally and vertically affected in this case, are set out below. |
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(9)

The details on the definition of the first two markets, which are primarily and both horizontally and vertically affected in this case, are set out below.

The retail mobile telecommunications services market

The retail mobile telecommunications services market

| (10) | The Commission considers that, for the purpose of this case, mobile and fixed telecommunication services, including data services constitute separate markets. |
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(10)

The Commission considers that, for the purpose of this case, mobile and fixed telecommunication services, including data services constitute separate markets.

| (11) | The Commission concluded that the relevant product market in this case is the retail mobile telecommunications services market. In previous decisions (3), the Commission found that there is one overall market for retail mobile telecommunications services. This is the market on which mobile network operators (‘MNOs’) and different types of non-MNOs sell voice and data services to end customers via a mobile network. In previous decisions, the Commission did not further divide this market by type of customer (business or private customers), by type of payment modality (post-paid or pre-paid), nor by type of network technology (2G/GSM or 3G/UMTS). The Commission has not previously found that there is a separate market for data-only services (4). |
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(11)

The Commission concluded that the relevant product market in this case is the retail mobile telecommunications services market. In previous decisions (3), the Commission found that there is one overall market for retail mobile telecommunications services. This is the market on which mobile network operators (‘MNOs’) and different types of non-MNOs sell voice and data services to end customers via a mobile network. In previous decisions, the Commission did not further divide this market by type of customer (business or private customers), by type of payment modality (post-paid or pre-paid), nor by type of network technology (2G/GSM or 3G/UMTS). The Commission has not previously found that there is a separate market for data-only services (4).

3

4

| (12) | In this case, the Commission assessed whether different sub-segments of the market constitute separate markets. The Commission reviewed the post-paid and pre-paid segments, the Voice (including voice/data), mobile broadband (data only) and the private and business customer segments. Following the results of its investigation in this case, the Commission concluded, consistent with its previous decisions, that the relevant product market is the overall market for retail mobile telecommunication services. |
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(12)

In this case, the Commission assessed whether different sub-segments of the market constitute separate markets. The Commission reviewed the post-paid and pre-paid segments, the Voice (including voice/data), mobile broadband (data only) and the private and business customer segments. Following the results of its investigation in this case, the Commission concluded, consistent with its previous decisions, that the relevant product market is the overall market for retail mobile telecommunication services.

| (13) | In line with previous Commission decisions and the Parties’ view, the geographic scope of the above market is national, that is to say it corresponds to the territory of Germany. |
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(13)

In line with previous Commission decisions and the Parties’ view, the geographic scope of the above market is national, that is to say it corresponds to the territory of Germany.

Wholesale market for access and call origination on public mobile telephone networks

Wholesale market for access and call origination on public mobile telephone networks

| (14) | On this market, MNOs sell access to their network and the ability to make calls (‘call origination’) to mobile virtual network operators (‘MVNOs’) and Service Providers. Both types of players use the wholesale access granted by MNOs to sell mobile telecommunications under their own brands and in their own name on the retail market. However, while MVNOs own and operate certain parts of a mobile network, such as the core network, Service Providers do not own any network infrastructure. The Commission considers that there is a distinct wholesale market for access and call origination on public mobile telephone networks. |
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(14)

On this market, MNOs sell access to their network and the ability to make calls (‘call origination’) to mobile virtual network operators (‘MVNOs’) and Service Providers. Both types of players use the wholesale access granted by MNOs to sell mobile telecommunications under their own brands and in their own name on the retail market. However, while MVNOs own and operate certain parts of a mobile network, such as the core network, Service Providers do not own any network infrastructure. The Commission considers that there is a distinct wholesale market for access and call origination on public mobile telephone networks.

| (15) | In line with previous Commission decisions, the Commission considers that geographically, the wholesale market corresponds to the dimension of the MNOs’ networks, which are limited to the German territory given that mobile licenses are granted on national basis. |
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(15)

In line with previous Commission decisions, the Commission considers that geographically, the wholesale market corresponds to the dimension of the MNOs’ networks, which are limited to the German territory given that mobile licenses are granted on national basis.

B.   Competitive assessment

Competitive assessment

1.   Retail market for mobile telecommunications services

Retail market for mobile telecommunications services

| (16) | The merger would reduce the number of MNOs in Germany from four to three and combine the third player with the fourth player. The result would be a market featuring three large MNOs of roughly similar size: Deutsche Telekom, Vodafone and the merged entity. |
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(16)

The merger would reduce the number of MNOs in Germany from four to three and combine the third player with the fourth player. The result would be a market featuring three large MNOs of roughly similar size: Deutsche Telekom, Vodafone and the merged entity.

| (17) | The decision finds that both Telefónica and E-Plus are important competitive forces on the German retail market for mobile telecommunications services, in particular in terms of pricing as well as in terms of the innovative nature of offers. They would continue to be an important competitive force absent the proposed transaction. The Parties have been close competitors in particular for low-value and pre-paid customers by offering a lesser network quality for less expensive tariffs than Deutsche Telekom and Vodafone. |
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(17)

The decision finds that both Telefónica and E-Plus are important competitive forces on the German retail market for mobile telecommunications services, in particular in terms of pricing as well as in terms of the innovative nature of offers. They would continue to be an important competitive force absent the proposed transaction. The Parties have been close competitors in particular for low-value and pre-paid customers by offering a lesser network quality for less expensive tariffs than Deutsche Telekom and Vodafone.

| (18) | Furthermore, the decision finds that the merger will lead to, first, the elimination of competition between the Parties and second, the merged entity will have a larger customer base that will lead it to lower incentives to grow and compete. Similarly, it is likely that the incentives of Vodafone and Deutsche Telekom to compete after the merger would be reduced. Moreover, the degree to which MVNOs, Service Providers and Branded Resellers are currently able to exercise competitive pressure is limited and would be further reduced post transaction. |
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(18)

Furthermore, the decision finds that the merger will lead to, first, the elimination of competition between the Parties and second, the merged entity will have a larger customer base that will lead it to lower incentives to grow and compete. Similarly, it is likely that the incentives of Vodafone and Deutsche Telekom to compete after the merger would be reduced. Moreover, the degree to which MVNOs, Service Providers and Branded Resellers are currently able to exercise competitive pressure is limited and would be further reduced post transaction.

| (19) | Indeed, the decision lays out that both Deutsche Telekom and Vodafone would benefit from the fact that E-Plus, the most price aggressive competitor, will be eliminated and that it is likely that the incentives of Deutsche Telekom and Vodafone to compete aggressively will also be reduced. According to the decision, the ability of existing MVNOs and Service Providers to exercise the same degree of competitive pressure as an MNO is more limited and would be further reduced post-transaction. Moreover, MVNOs and Service Providers currently have limited incentives to compete aggressively for new customers than MNOs due to lower (fixed) network investment costs that have to be recovered. MVNOs and Service Providers pay MNOs for the use of the network on a ‘pay-as-you-go’ basis, depending on the actual usage of the network by its customers. The incremental cost of adding customers or increasing network usage is therefore the same for each additional unit used and is pre-determined in the negotiations between MVNOs and MNOs. |
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(19)

Indeed, the decision lays out that both Deutsche Telekom and Vodafone would benefit from the fact that E-Plus, the most price aggressive competitor, will be eliminated and that it is likely that the incentives of Deutsche Telekom and Vodafone to compete aggressively will also be reduced. According to the decision, the ability of existing MVNOs and Service Providers to exercise the same degree of competitive pressure as an MNO is more limited and would be further reduced post-transaction. Moreover, MVNOs and Service Providers currently have limited incentives to compete aggressively for new customers than MNOs due to lower (fixed) network investment costs that have to be recovered. MVNOs and Service Providers pay MNOs for the use of the network on a ‘pay-as-you-go’ basis, depending on the actual usage of the network by its customers. The incremental cost of adding customers or increasing network usage is therefore the same for each additional unit used and is pre-determined in the negotiations between MVNOs and MNOs.

| (20) | A quantitative assessment of the likely effects of the elimination of horizontal competition as a result of the merger indicates that the merger is likely to lead to significant price increases in the pre-paid and post-paid residential segments. |
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(20)

A quantitative assessment of the likely effects of the elimination of horizontal competition as a result of the merger indicates that the merger is likely to lead to significant price increases in the pre-paid and post-paid residential segments.

2.   Wholesale market for access and call origination on mobile networks

Wholesale market for access and call origination on mobile networks

| (21) | The decision finds that, despite the relatively low combined market shares of the Parties in terms of revenues and in terms of subscribers, the proposed transaction would nevertheless have a negative impact on the merged entity’s, and the other two MNOs’, incentive to grant MVNOs and Service Providers access to their respective mobile networks at commercially attractive conditions. It concludes that the proposed transaction may give rise to horizontal non-coordinated anti-competitive effects on the wholesale market for access and call origination on public mobile communication networks. |
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(21)

The decision finds that, despite the relatively low combined market shares of the Parties in terms of revenues and in terms of subscribers, the proposed transaction would nevertheless have a negative impact on the merged entity’s, and the other two MNOs’, incentive to grant MVNOs and Service Providers access to their respective mobile networks at commercially attractive conditions. It concludes that the proposed transaction may give rise to horizontal non-coordinated anti-competitive effects on the wholesale market for access and call origination on public mobile communication networks.

| (22) | The decision leaves open whether these negative effects constitute a significant impediment of effective competition since the commitments proposed by Telefónica in relation to the retail market will also address any potential concerns on the wholesale market. |
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(22)

The decision leaves open whether these negative effects constitute a significant impediment of effective competition since the commitments proposed by Telefónica in relation to the retail market will also address any potential concerns on the wholesale market.

3.   Efficiencies

Efficiencies

| (23) | The decision finds that the efficiencies claimed by the Notifying Party in relation to the retail market for mobile telecommunications services are not verifiable, merger specific and/or likely to benefit consumers. In particular, the claimed quality improvements and incremental cost savings could, to a very large extent, be achieved by alternative means (notably network sharing). The decision concludes that the Notifying Party has failed to show that the efficiencies are likely to counter any adverse effect on competition. |
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(23)

The decision finds that the efficiencies claimed by the Notifying Party in relation to the retail market for mobile telecommunications services are not verifiable, merger specific and/or likely to benefit consumers. In particular, the claimed quality improvements and incremental cost savings could, to a very large extent, be achieved by alternative means (notably network sharing). The decision concludes that the Notifying Party has failed to show that the efficiencies are likely to counter any adverse effect on competition.

C.   Commitments submitted by the notifying party

Commitments submitted by the notifying party

1.   Description of the commitments

Description of the commitments

| (24) | In order to address the competition concerns, the Notifying Party submitted a final set of commitments on 29 May 2014 comprising the following three elements: (i) the MNO commitment; (ii) the MBA commitment; and (iii) the non-MNO commitment. |
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(24)

In order to address the competition concerns, the Notifying Party submitted a final set of commitments on 29 May 2014 comprising the following three elements: (i) the MNO commitment; (ii) the MBA commitment; and (iii) the non-MNO commitment.

| (25) | The MNO component consists of an offer by Telefónica to sell to a new MNO entrant a number of assets and services, which are needed to start operating as an MNO in the German market. These assets include (a) spectrum; (b) national roaming; (c) network sites; (d) passive radio network sharing and (e) shops. |
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(25)

The MNO component consists of an offer by Telefónica to sell to a new MNO entrant a number of assets and services, which are needed to start operating as an MNO in the German market. These assets include (a) spectrum; (b) national roaming; (c) network sites; (d) passive radio network sharing and (e) shops.

| (26) | Under the MBA commitment, Telefónica commits to sell upfront 20 % of the combined network capacity of the merged entity to up to three non-network operators. Telefónica also commits to offer for sale an additional 10 % of such capacity to these players at pre-defined terms and conditions. To the extent that the purchasers of the capacity already host subscribers on the Telefónica and/or the E-Plus networks, the capacity required to host these subscribers will also be sold by Telefónica (but deducted from the additional 10 % capacity to be offered). |
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(26)

Under the MBA commitment, Telefónica commits to sell upfront 20 % of the combined network capacity of the merged entity to up to three non-network operators. Telefónica also commits to offer for sale an additional 10 % of such capacity to these players at pre-defined terms and conditions. To the extent that the purchasers of the capacity already host subscribers on the Telefónica and/or the E-Plus networks, the capacity required to host these subscribers will also be sold by Telefónica (but deducted from the additional 10 % capacity to be offered).

| (27) | Telefónica’s commits to upfront enter into an agreement for the sale and offer of the entire capacity covered by the MBA commitment prior to the closing of the proposed transaction. In other words, Telefónica will not be able to close the proposed transaction until it has entered into a legally binding agreement with one or more purchasers and until the Commission has formally approved the purchaser(s). |
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(27)

Telefónica’s commits to upfront enter into an agreement for the sale and offer of the entire capacity covered by the MBA commitment prior to the closing of the proposed transaction. In other words, Telefónica will not be able to close the proposed transaction until it has entered into a legally binding agreement with one or more purchasers and until the Commission has formally approved the purchaser(s).

| (28) | The agreement to be entered into between Telefónica and the purchaser(s) will have an initial duration of 5 years, but it could be unilaterally extended for an additional 5 years at the purchaser(s)’ request at pre-defined terms and conditions. |
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(28)

The agreement to be entered into between Telefónica and the purchaser(s) will have an initial duration of 5 years, but it could be unilaterally extended for an additional 5 years at the purchaser(s)’ request at pre-defined terms and conditions.

| (29) | Under the non-MNO commitment, Telefónica commits to offer to extend all existing wholesale contracts with MVNOs and Service Providers that are currently wholesale customers of Telefónica or E-Plus until the end of year 2025. Moreover, Telefónica commits to grant wholesale access to its 4G network to all MVNOs and Service Providers a certain period of time after the technical launch of the MBA MVNOs at the best available market terms and conditions. |
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(29)

Under the non-MNO commitment, Telefónica commits to offer to extend all existing wholesale contracts with MVNOs and Service Providers that are currently wholesale customers of Telefónica or E-Plus until the end of year 2025. Moreover, Telefónica commits to grant wholesale access to its 4G network to all MVNOs and Service Providers a certain period of time after the technical launch of the MBA MVNOs at the best available market terms and conditions.

2.   Assessment of the commitments

Assessment of the commitments

| (30) | The decision concludes that the commitments fully address the competition concerns. |
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(30)

The decision concludes that the commitments fully address the competition concerns.

| (31) | The MNO commitment, in conjunction with the fact that the German telecom regulator is planning to open proceedings in late 2014 for holding an auction to award a significant amount of spectrum, contributes to keep the door open for the entry of a new MNO in the German market or to the possible development of the purchaser(s) of the MBA commitment into an MNO. |
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(31)

The MNO commitment, in conjunction with the fact that the German telecom regulator is planning to open proceedings in late 2014 for holding an auction to award a significant amount of spectrum, contributes to keep the door open for the entry of a new MNO in the German market or to the possible development of the purchaser(s) of the MBA commitment into an MNO.

| (32) | As regards the MBA commitment, the decision finds that this commitment will significantly increase the ability and incentive of MVNOs to compete on the retail market for mobile telecommunication services in Germany and therefore offset any possible price increase resulting from the proposed transaction. |
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(32)

As regards the MBA commitment, the decision finds that this commitment will significantly increase the ability and incentive of MVNOs to compete on the retail market for mobile telecommunication services in Germany and therefore offset any possible price increase resulting from the proposed transaction.

| (33) | The total amount of capacity to be sold and offered by Telefónica under the MBA commitment is significant both in terms of incremental market share compared to the pre-merger situation, assuming Telefónica’s market share remains constant, and in terms of the sum of the capacity to be sold and offered by Telefónica, as measured in terms of total market share. |
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(33)

The total amount of capacity to be sold and offered by Telefónica under the MBA commitment is significant both in terms of incremental market share compared to the pre-merger situation, assuming Telefónica’s market share remains constant, and in terms of the sum of the capacity to be sold and offered by Telefónica, as measured in terms of total market share.

incremental

| (34) | Telefónica will indeed be obliged to provide the purchaser(s) of the MBA commitment with access to all types of services and technologies (including 4G and future technologies). The purchaser(s) will therefore have access to the same network quality as Telefónica and will be free to design their retail tariffs in total independence from Telefónica. That will enable the purchaser(s) of the MBA commitment to fully compete with the MNOs by making highly attractive offers to end customers for current and new network technologies that are currently offered by MNOs only at a considerable surcharge. |
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(34)

Telefónica will indeed be obliged to provide the purchaser(s) of the MBA commitment with access to all types of services and technologies (including 4G and future technologies). The purchaser(s) will therefore have access to the same network quality as Telefónica and will be free to design their retail tariffs in total independence from Telefónica. That will enable the purchaser(s) of the MBA commitment to fully compete with the MNOs by making highly attractive offers to end customers for current and new network technologies that are currently offered by MNOs only at a considerable surcharge.

| (35) | Most notably, the remedy is of a quasi-structural nature given that the MVNO/Service Provider(s) that will purchase capacity under the MBA commitment will commit upfront to purchase a significant amount of capacity from the merged entity at a fixed price. Hence, the MVNO/Service Provider(s) will have a strong incentive to compete effectively as they will have pre-purchased a significant amount of capacity that will need to be monetised. This capacity-based model is more attractive from a competition point of view than the standard MVNO/Service Provider contracts where these players pay the host MNO host on a per usage basis. Indeed, under the standard ‘pay as you go’ MVNO/Service Provider contracts, additional customers/traffic imply incremental payments to the MNO. Under the capacity-based model enshrined in the MBA commitment, there are no such network related incremental costs when acquiring new customers. In this respect, the capacity-based model comes closer to the cost structure of an MNO and hence provides similar incentives to acquire additional customers at the margin. This implies that the MVNO/Service Provider(s) entering into the MBA commitment with the merged entity can act as effective constraints on the MNOs. |
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(35)

Most notably, the remedy is of a quasi-structural nature given that the MVNO/Service Provider(s) that will purchase capacity under the MBA commitment will commit upfront to purchase a significant amount of capacity from the merged entity at a fixed price. Hence, the MVNO/Service Provider(s) will have a strong incentive to compete effectively as they will have pre-purchased a significant amount of capacity that will need to be monetised. This capacity-based model is more attractive from a competition point of view than the standard MVNO/Service Provider contracts where these players pay the host MNO host on a per usage basis. Indeed, under the standard ‘pay as you go’ MVNO/Service Provider contracts, additional customers/traffic imply incremental payments to the MNO. Under the capacity-based model enshrined in the MBA commitment, there are no such network related incremental costs when acquiring new customers. In this respect, the capacity-based model comes closer to the cost structure of an MNO and hence provides similar incentives to acquire additional customers at the margin. This implies that the MVNO/Service Provider(s) entering into the MBA commitment with the merged entity can act as effective constraints on the MNOs.

| (36) | As regards the non-MNO commitment, the decision finds that this commitment improves the position of MVNOs and Service Providers to whom one of the Parties currently grants wholesale access, as it provides them with planning security for 2G and 3G services. Furthermore, all MVNOs and Service Providers active in Germany have an opportunity to be granted access to 4G services. |
| --- | --- |

(36)

As regards the non-MNO commitment, the decision finds that this commitment improves the position of MVNOs and Service Providers to whom one of the Parties currently grants wholesale access, as it provides them with planning security for 2G and 3G services. Furthermore, all MVNOs and Service Providers active in Germany have an opportunity to be granted access to 4G services.

V.   CONCLUSION

CONCLUSION

| (37) | For the reasons mentioned above, the decision concludes that the concentration as modified by the commitments submitted on 29 May 2014 will not significantly impede effective competition in the Internal Market or in a substantial part of it. |
| --- | --- |

(37)

For the reasons mentioned above, the decision concludes that the concentration as modified by the commitments submitted on 29 May 2014 will not significantly impede effective competition in the Internal Market or in a substantial part of it.

| (38) | Consequently the concentration is declared compatible with the Internal Market and the functioning of the EEA Agreement, in accordance with Article 2(2) and Article 8(2) of the Merger Regulation and Article 57 of the EEA Agreement. |
| --- | --- |

(38)

Consequently the concentration is declared compatible with the Internal Market and the functioning of the EEA Agreement, in accordance with Article 2(2) and Article 8(2) of the Merger Regulation and Article 57 of the EEA Agreement.

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(1)  OJ L 24, 29.1.2004, p. 1.

1

(2)  Commission decision of 12 December 2012 in Case COMP/M.6497 — Hutchison 3G Austria/Orange Austria, paragraphs 58, 63, 67 and 70; Commission decision of 1 March 2010 in Case COMP/M.5650 — T-Mobile/Orange UK, 1 March 2010, paragraphs 27-30, 32-34, 36-37.

2

Hutchison 3G Austria/Orange Austria

T-Mobile/Orange UK

(3)  Commission decision of 12 December 2012 in Case COMP/M.6497 — Hutchison 3G Austria/Orange Austria, paragraph 58; Commission decision of 1 March 2010 in Case COMP/M.5650 — T-Mobile/Orange UK, paragraphs 21, 24; Commission decision of 27 November 2007 in Case COMP/M.4947 — Vodafone/Tele2 Italy/Tele2 Spain, paragraph 14; Commission decision of 26 April 2006 in Case COMP/M.3916 — T-Mobile Austria/Tele.ring, paragraph 18 (but leaving open the question whether a separate market exists for specific 3G-only applications).

3

Hutchison 3G Austria/Orange Austria

T-Mobile/Orange UK

Vodafone/Tele2 Italy/Tele2 Spain

T-Mobile Austria/Tele.ring

(4)  Commission decision of 12 December 2012 in Case COMP/M.6497 — H3G Austria/Orange Austria, paragraph 52.

4

H3G Austria/Orange Austria

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