COMMISSION DECISION of 22/12/1995 declaring a concentration to be compatible with the common market (Case No IV/M.595 - British Telecommunications / VIAG) according to Council Regulation (EEC) No 4064/89

(Only the English text is authentic).

The paper version of the decision is available through the sales offices of the Office of Official Publications of the European Communities

PUBLIC VERSION

MERGER PROCEDURE

ARTICLE 6(1)(b) DECISION

TO THE NOTIFYING PARTIES

Dear Sirs,

Subject :<ind> Case No IV/M.595 British Telecommunications/VIAG

<ind> <ind> Notification of a concentration pursuant to Article 4 of Council Regulation No 4064/89

1.<ind> On 24 November 1995, the Commission received a notification of a proposed concentration pursuant to Article 4 of Council Regulation (EC) No 4064/89 [OJ No L 395 of 30.12.1989; Corrigendum: OJ No L 257 of 21.09.1990, p. 13.] by which the undertakings British Telecommunications (BT) and VIAG acquire within the meaning of Article 3 (1) b of the Council Regulation joint control of their 50:50 joint venture VIAG Interkom (Interkom).

2.<ind> After examination of the notification, the Commission has concluded that the notified operation falls within the scope of Council Regulation No 4064/89 and does not raise serious doubts as to its compatibility with the common market and with the functioning of the EEA Agreement.

I. <ind> THE PARTIES

3.<ind> BT is the main telecommunications operator in the United Kingdom. It has also activities outside the United Kingdom, in particular the 'Concert' agreement with the US operator MCI, for the provision of advanced business telecom services to multinational companies, as well as other joint ventures in Italy, Sweden andSpain. Its German subsidiary BT Telecom (Deutschland) GmbH had a turnover of less than [Deleted business secret. Less than DM 30 million.] million in 1994.

4.<ind> VIAG is the holding company of operating companies located primarily in Germany with acitivities mainly in the areas of energy, chemicals, packaging and logistics. VIAG´s subsidiary TB & D Telekommunikation Gesellschaft fuer Betrieb und Dienstleistungen GmbH (TB&D) provides telecommunications services to VIAG subsidiaries, but not to third parties which is also not possible from a regulatory point of view. The telecommunications services are based on the optical fibre network owned by Bayernwerk, in which VIAG has a [Deleted.] share.

II.<ind> THE OPERATION

5.<ind> The objective of the parties´ joint venture Interkom is to become an alternative telecommunications operator in Germany, including on the public voice telephony market as soon as this is possible from a regulatory point of view, and to start with the services already liberalized (mainly data transmission and services to closed user groups, i.e. private network services). All German activities of the parties in the field of Interkom are transferred to the joint venture. These consist of BT´s existing German telecommunications business and certain activities which VIAG currently carries out through its subsidiary TB&D as well as VIAG´s domestic managed network services.

III.<ind> CONCENTRATION

6.<ind> The joint venture will be jointly controlled by BT and VIAG. Each partner has 50% of the shares and votes in the joint venture. Each party is initially entitled to appoint 3 members to the Partner´s Committee which is responsible for taking strategic decisions including the approval of the budget.

7.<ind> Furthermore, the joint venture will perform on a lasting basis all functions of an autonomous economic entity. Interkom carries BT´s and VIAG´s telecommunications activities in Germany. In particular, the exisiting German telecommunications business of BT will be transferred to the joint venture. The activities of VIAG´s subsidiary TB&D in the business field of Interkom will also be transferred to Interkom.

8.<ind> The creation of the joint venture will not give rise to coordination of the competitive behaviour of the parties amongst themselves or between them and the joint venture. Interkom will basically be a domestic German telecommunications provider. VIAG will withdraw from the markets on which Interkom operates. In addition, it is economically implausible that VIAG will reenter the markets of Interkom because of the size of investment required to achieve a critical mass on the German market.

IV.<ind> COMMUNITY DIMENSION

9.<ind> The concentration has a Community dimension within the meaning of Article 1 of the Merger Regulation. The combined aggregate worldwide turnover of BT and VIAG amounts to more than 5.000 million ECU. The aggregate Communitywide turnover of each is more than 250 million ECU. The parties do not achieve more than twothirds of their Communitywide turnover in one and the same Memeber State.

V.<ind> COMPATIBILITY WITH THE COMMON MARKET

10.<ind> Interkom will be a competitor of Deutsche Telekom. Its activities involve two distinct dimensions:

<ind> <ind> a domestic German dimension where Interkom will offer all currently liberalized telecommunications services and voice services to closed user goups; when full liberalisation is achieved, it will also offer public voice telephony services;

<ind> <ind> an international dimension, as a result of the fact that Interkom will be a subdistributor of BT/MCI´s 'Concert' services, which are by definition of a transnational nature.

11.<ind> The servises provided by Interkom will include domestic and transborder managed network services including data, voice, visual and integrated access services to customers in Germany. The transborder services will be offered by 'Concert', the joint venture between BT and MCI. Interkom will establish and operate a domestic network to deliver these services which will be interconnected with the 'Concert' network. The parties identified these as product markets:

<ind> <ind> domestic value added network services,

<ind> <ind> private switched voice services to large business customers,

<ind> <ind> domestic corporate network services and

<ind> <ind> public voice services.

<ind> As there is no risk of the creation of a dominant position in any relevant market, the precise market definition can however be left open.

12.<ind> The primary area of activity of the joint venture is Germany. Therefore, the relevant geographical market is Germany. For some services including 'Concert' services and certain value added and corporate network services, the relevant geographical market could be European or worldwide.

13.<ind> As Deutsche Telekom clearly dominates the German market and there are also other alliances which are trying to enter the German market, the creation of a market domination position in Germany can not be foreseen. The operation seems to be positive from the competition point of view. As far as the international dimension is concerned, there is also no threat of a market domination position.

VI.<ind> CONCLUSION

14.<ind> The proposed concentration therefore does not raise serious doubts as to its compatibility with the common market.

15.<ind> For the above reasons, the Commission has decided not to oppose the notified operation and to declare it compatible with the common market and with the functioning of the EEA Agreement. This decision is adopted in application of Article 6 (1) b of Council Regulation No 4064/89.

For the Commission