Communication from the Commission published pursuant to Article 27(4) of Council Regulation (EC) No 1/2003 in Case AT.40305 - Network Sharing - Czech Republic

(2021/C 398/16)

1. Introduction

(1) According to Article 9 of the Council Regulation (EC) No 1/2003 of 16 December 2002 on the implementation of the rules on competition laid down in Articles 81 and 82 of the Treaty (1), the European Commission (‘Commission’) may decide – in cases where it intends to adopt a decision requiring that an infringement is brought to an end and the parties concerned offer commitments to meet the concerns expressed to them by the Commission in its preliminary assessment – to make those commitments binding on the undertakings. Such a decision may be adopted for a specified period and shall conclude that there are no longer grounds for action by the Commission.

(2) According to Article 27(4) of the same Regulation, the Commission shall publish a concise summary of the case and the main content of the commitments. Interested parties may submit their observations within the time limit fixed by the Commission.

2. Summary of the case

(3) On 7 August 2019, the Commission adopted a Statement of Objections in which it expressed its preliminary concerns as to the compatibility with Article 101 of the TFEU and Article 53 of the Agreement on the European Economic Area of the horizontal network sharing agreements (‘NSAs’) concluded between T- Mobile Czech Republic a.s. (‘T-Mobile’) and O2 Czech Republic a.s. (‘O2’) (2) and then CETIN a.s. (‘CETIN’), which legally succeeded O2 as the Party to the NSAs and as the operator of the infrastructure concerned by the NSAs (3), as well as the Mobile Network Services Agreement (‘MNSA’) concluded between O2 and CETIN (4). T-Mobile, O2 and CETIN are collectively referred to as the ‘Sharing Parties’ in the present Communication.

(4) On 14 February 2020, a Statement of Objections was addressed to the parent companies of the Sharing Parties, namely Deutsche Telekom AG and PPF Group N.V.

(5) After careful analysis of the evidence on the file, including the arguments and evidence submitted by the parties to this proceeding in their replies to the SO and at the Oral Hearing (5), the Commission set out its concerns as regards the compatibility of the NSAs and the MNSA with Article 101 of the TFEU and Article 53 of the EEA Agreement in the preliminary assessment within the meaning of Article 9(1) of Regulation (EC) No 1/2003, adopted on 27 August 2021. The preliminary assessment was addressed to the Sharing Parties and their parent companies.

(6) The concerns expressed in the preliminary assessment differ from the objections expressed by the Commission in the Statement of Objections addressed to the parties to the proceedings. Solely the concerns expressed in the preliminary assessment form part of the Commission’s preliminary assessment within the meaning of Article 9(1) of Regulation (EC) No 1/2003.

(7) The NSAs concern the sharing of passive (6) and active infrastructure (7) for 2G, 3G and 4G mobile telecommunications technologies, while spectrum and the core network remain separate for each operator. The cooperation comprises the entire territory of Czechia, with the exception of Prague and Brno. Approximately three quarters of subscribers in Czechia use the common network infrastructure of the Sharing Parties. The MNSA was concluded to govern the modalities of the mobile network services provided to O2 by CETIN, after the latter legally succeeded O2 as a contractual party in the NSAs.

(8) According to the Commission’s preliminary assessment, the NSAs, as well as the MNSA, may restrict competition in violation of Article 101(1) of the TFEU by their effects. The Commission preliminarily considers that the NSAs (together with the MNSA), considered in their specific market context, reduce the Sharing Parties’ ability and incentives to unilaterally invest in network infrastructure and therefore may negatively affect the ability and incentives of T- Mobile and O2 to compete on the retail and wholesale markets for mobile telecommunications services in Czechia.

(9) Specifically, in the preliminary assessment, the Commission considers that the NSAs (i) led to a lack of roll-out of the 2 100 MHz capacity band in Eastern Czechia by T-Mobile, as well as to restrictions of the Sharing Parties’ individual flexibility in rolling-out the 1 800 MHz band, and (ii) disincentivised the Sharing Parties from unilateral network deployments of any type due to financial disincentives as well as information exchange.

(10) As regards (i), in the preliminary assessment, the Commission observes that T- Mobile’s technology allows it to optimally use its spectrum holdings and deploy LTE in the 2 100 MHz spectrum band (‘LTE2100’). (8) T-Mobile has made use of this ability in the area where it is the Master Operator (9) (the Western part of Czechia). However, the Commission’s preliminary concern is that T-Mobile was unable to deploy LTE2100 in the area where it is the Visitor operator and which is served by CETIN’s network (the Eastern part of Czechia), to the disadvantage of the subscribers in this part of the country. Moreover, capacity extensions on 1 800 MHz spectrum band could be added without any major installations and/or modifications only on specific sites based on the common network planning of the Sharing Parties.

(11) As regards (ii), the Commission preliminarily concludes that the Visitor’s incentives to invest may be reduced. This is due to the fact that, as the Commission’s preliminary assessment suggests, network upgrades are charged by the Master Operator to the Visitor Operator at a price that is higher than the underlying costs. Thus, the agreed prices for network deployments exceed the underlying cost of such deployment that would have been incurred by the Visitor Operator if it were the Master Operator. Also, the Commission preliminarily considers that the scope of the information exchanged goes beyond what is strictly necessary for the functioning of the NSAs and includes strategic information that decreases the Sharing Parties’ incentives to compete with each other. As regards the information exchange, the Commission preliminarily considers that it is not counterbalanced by the structural separation of O2 and CETIN as CETIN – based on the provisions of the MNSA requiring CETIN to share certain information with O2 – does not function effectively as a ‘black box’, i.e. it does not effectively prevent information spill-over between T-Mobile and O2.

3. The main content of the offered commitments

(12) The parties subject to the proceedings do not agree with the Commission’s preliminary assessment. They have nevertheless offered commitments pursuant to Article 9 of Regulation (EC) No 1/2003, to meet the Commission’s competition concerns. The key elements of the commitments can be summarised as follows: — Network Modernization Commitment - deployment of multi-standard Radio Access Network (‘RAN’) equipment in the Mid-Band layers: existing equipment, including both hardware and software, on all existing sites where, by the end of March 2021, at least one Mid-Band layer has been active, will be replaced in order to be able to support both 4G and 5G operations in the Mid-Band layers. The upgrade of the existing hardware will enhance the capabilities of the RAN in the deployment of capacity layer bands, since i.a. the existing hardware supports the operation of LTE2100 only to a limited extent. This network modernisation commitment will occur within less than 5 years, after the Commencement Date (10). — Setting and review of the financial conditions for unilateral deployments - cost- based pricing for any investments demanded by the Visitor Operator to the Master Operator. — Improvement of the NSAs contractual provisions as regards information exchange - contractual changes to limit information exchange: — Streamline the governance structure involved in information exchange: remove one of the levels of the governance structure, limit working groups to technical staff only (involving non-technical staff only to the extent objectively necessary and under defined rules for their participation), working groups to be staffed on a need-to-know basis, and limit meetings of the working groups. — Limit the information exchanged: update and refine the list of categories of information that can be exchanged within each respective working group, specify what information may be handed out to the non-technical staff, commercially sensitive information to be classified as prohibited information, explicitly prohibit the exchange of capacity forecasts and traffic forecasts, remove the obligation to annually discuss changes of certain conditions of the NSAs. — MNSA Commitments - measures to ensure that CETIN acts as a ‘black box’ between T-Mobile and O2, and in particular the MNSA commitments : — specify how CETIN shall treat O2 under the MNSA compared to T- Mobile under the NSAs; — ensure that CETIN shall not inform O2 about or pass on or otherwise automatically make available to O2 commercially sensitive information; — ensure that CETIN shall not be constrained by O2 in changing the design and composition of the mobile network.

(13) Furthermore, the commitments stipulate that an independent Monitoring Trustee shall be appointed in order to monitor the Sharing Parties’ compliance with the commitments.

(14) The commitments with regard to the NSAs will remain in force until 28 October 2033. The commitments with regard to the MNSA would remain in force for a period of (i) the term of the MNSA or (ii) the term of the NSAs whichever of those terms ends earlier.

(15) The commitments are published in full in English on the website of the Directorate-General for Competition at: https://ec.europa.eu/competition-policy/index_en

4. Invitation to make comments

(16) Subject to market testing, the Commission intends to adopt a decision under Article 9(1) of Regulation (EC) No 1/2003 declaring binding the commitments summarised above and published on the Internet, on the website of the Directorate-General for Competition.

(17) In accordance with Article 27(4) of Regulation (EC) No 1/2003, the Commission invites interested third parties to submit their observations on the proposed commitments. These observations must reach the Commission not later than one month following the date of this publication. Interested third parties are also asked to submit a non-confidential version of their comments, in which any information they claim to be business secrets and other confidential information should be deleted and replaced as required by a non-confidential summary or by the words ’business secrets’ or ’confidential’.

(18) Answers and comments should preferably be reasoned and should set out the relevant facts. If you identify a problem with any part of the proposed commitments, the Commission would also invite you to suggest a possible solution.

(19) Observations can be sent to the Commission under reference number AT.40305 – Network Sharing – Czech Republic either by email (COMP-GREFFE- ANTITRUST@ec.europa.eu), by fax (+32 22950128) or by post, to the following address: European Commission Directorate-General for Competition Antitrust Registry B-1049 Bruxelles/Brussel BELGIQUE/BELGIË

(1) OJ L 1, 4.1.2003, p. 1. With effect from 1 December 2009, Articles 81 and 82 of the EC Treaty have become Articles 101 and, respectively, 102 of the Treaty on the Functioning of the European Union (‘TFEU’). The two sets of provisions are in substance identical. For the purposes of this notice, references to Articles 101 and 102 of the TFEU should be understood as references to Articles 81 and 82 of the EC Treaty when applicable.

(2) The NSAs regarding 2G/3G and LTE mobile telecommunications technologies were concluded on 29 October 2013 and 2 May 2014, respectively.

(3) As of 1 June 2015, CETIN owns and manages both fixed and mobile infrastructure formerly owned by O2, while O2 remained active as a Mobile Network Operator in the Czech Republic.

(4) The MNSA was concluded on 2 June 2015.

(5) The Oral Hearing took place on 15-17 September 2020.

(6) Passive sharing involves sharing of basic infrastructure, such as the space at a rooftop of a building or on a telecommunications tower, the antenna masts, power supplies and air conditioning systems.

(7) Active sharing involves sharing, in addition to the passive assets, the active radio equipment, meaning the base station, the antennas and, for the technologies applicable (2G and 3G), the controller nodes.

(8) T-Mobile uses equipment which supports the Single RAN concept, that is, the flexible use of 2G, 3G and 4G mobile telecommunications technologies in the same band, as well as across different bands.

(9) The radio access development and operation is shared according to the territoriality principle of Master/Visitor Operator structure, whereby each of T-Mobile and CETIN is in charge of the network in one side of the country, e.g. T-Mobile deploys, operates and maintains a consolidated mobile network infrastructure in the Western part of Czechia (i.e. it is the Master Operator in this part of the country) and serves the subscribers of both operators in this area.

(10) Commencement Date means the date on which the Sharing Parties are notified by the Commission of the adoption of the final decision accepting these commitments pursuant to Article 9 of Regulation 1/2003 and closing case AT.40305.