2007/193/EC: Commission Decision of 26 April 2006 declaring a concentration compatible with the common market and the functioning of the EEA Agreement (Case COMP/M.3916 — T-Mobile Austria/tele.ring) (notified under document number C(2006) 1695)
Date: 2006-04-26
Institutions: European Commission
Subjects: Austria, competition, economic concentration, merger control, radio telecommunications, service, telecommunications industry

L 88/44

EN

Official Journal of the European Union

29.3.2007

(Acts adopted under the EC Treaty/Euratom Treaty whose publication is not obligatory)

II

DECISIONS

COMMISSION

COMMISSION DECISION

of 26 April 2006

declaring a concentration compatible with the common market and the functioning of the EEA
Agreement
(Case COMP/M.3916 — T-Mobile Austria/tele.ring)

(notified under document number C(2006) 1695)

(Only the German version is authentic)

(2007/193/EC)

On 26 April 2006 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 and in the working languages of the Commission on the
website of the Directorate-General for Competition, at the following address: http://ec.europa.eu/comm/
competition/index_en.html

SUMMARY OF THE DECISION

(1)

This case concerns a proposed operation pursuant
to
Article 4 of Regulation (EC) No 139/2004 (the Merger
Regulation), whereby the undertaking T-Mobile Austria
GmbH (T-Mobile, Austria), part of
the German group
Deutsche Telekom AG (Deutsche Telekom), acquires,
within the meaning of Article 3(1)(b) of the Council Regu-
lation, control of the whole of the undertaking tele.ring
Unternehmensgruppe (tele.ring, Austria).

(2)

T-Mobile and tele.ring operate mobile networks in Austria
and are also active on related end-customer and wholesale
markets.

(3)

The proposed transaction involves T-Mobile acquiring all
the shares in tele.ring.

(4)

The market investigation has revealed that in the Austrian
market for the provision of mobile telecommunication
services to end customers the concentration would raise

impediment

serious
competition mainly
to effective
through unilateral effects. The undertakings proposed by
the parties, however, are suitable to remove the compe-
tition concerns.

1. The relevant product markets

(5)

The market investigation to define the relevant product
markets confirmed that as to the market for the provision
of mobile telecommunication services to end customers
that there is a single market for the provision of such
services to end customers and that no further distinction
needs to be made, for instance by customer type, voice
telephony and data services, 2G and 3G networks.

(6) As to the wholesale of termination services, the network
of each operator represents its own single market, as
viewed by the Commission in previous decisions and
Commission’s
Recommendation
reflected
2003/311/EC (2)
service
relevant
markets within the electronic communications sector.

product

and

the

on

in

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

(2) OJ L 114, 8.5.2003, p. 45.

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(7) With respect to wholesale international roaming services,
both companies offer
international
their
roaming services and hence they have concluded interna-
tional roaming agreements with foreign mobile telephony
telephony
operators. The different Austrian mobile
networks are in competition with each other for both
inbound and outbound traffic.

customers

(11) Analysing the switching rates, it was found that half of all
switching customers switched to tele.ring and furthermore
much more than half of the customers who left T-Mobile
and Mobilkom switched to tele.ring. This
analysis
confirms that tele.ring has exerted significant competitive
pressure on both large operators.

(8)

(9)

2. The relevant geographic markets

The market investigation to define the relevant geographic
markets confirmed that the geographic scope with respect
to the provision of mobile telecommunication services to
termination
end customers,
services and the wholesale of
roaming
services is national, i.e. limited to Austria.

likewise the wholesale of

international

3. Affected markets and competition analysis

(12) An analysis of the average per-minute price on the basis
of all the tariffs applied by the various network operators,
using data from the Austrian regulator and the consumer
association AK Wien, has shown that tele.ring has been
Its prices were
the most active player in the market.
among
competitive
thereby
pressure on T-Mobile and Mobilkom in particular […] *.
H3G closely followed the pricing of tele.ring, whereas
ONE as third player in the market was rather matching
with the larger players T-Mobile and Mobilkom.

exercising

lowest

the

their market

The notified concentration affects the market
for the
provision of mobile telecommunication services to end
customers, on which four companies currently operate
mobile
telephony networks based on 2G/GSM and
company, Hutchison
3G/UMTS technology and one
(H3G), only on 3G/UMTS technology. The five network
operators offer their customers a wide range of services.
Post-transaction, the new entity T-Mobile/tele.ring would
increase
(about
share
[30–40] (*) % (1) depending on turnover or customers)
similar to the incumbent Mobilkom,
leaving the other
two companies number three and four (with a market
share of around [10–20] * % for ONE and [0–10] * %
service providers
for H3G respectively).
play a negligible role in the Austrian market. Also
the discount brand of ONE, has only a very
YESSS!,
limited market
share and cannot be considered as
competing on the same level as the other operators
since it offers only a limited range of services.

Independent

level

to

a

(13)

In general terms, the incentive for an operator to attract
new customers
to an existing network by making
aggressive price offers is determined by the size of its
customer base. In its decision whether or not to price
aggressively any operator has to balance the expected
gains by additional
from new customers
revenues
attracted by lower tariffs against the risk of a decreasing
profitability of its existing customers to whom the price
reduction cannot be refused, at least in the medium and
long term. Generally speaking, that risk of a loss of profit-
ability is all the higher the larger the existing customer
base of an operator is. Consequently, tele.ring has started
with a small customer base that it had to increase through
an aggressive pricing policy to gain the necessary
numbers. By contrast, neither Mobilkom nor T-Mobile
has made any such move in the past by making parti-
cularly aggressive offers.

(10) The proposed transaction would give rise to non-coor-
dinated effects,
even though T-Mobile would not
become the largest player after the merger. From the
analysis of the market shares it can be concluded that,
for the last three years, tele.ring has played by far the
most active role on the market in practising successfully
a price aggressive strategy.
It has thereby increased its
market share substantially while the market shares of
the other operators have been largely flat or even
slightly decreasing. Calculation of the HHI revealed that
the level of concentration is already high and it would
significantly increase post-transaction. While T-Mobile
argues for cost efficiencies, the Parties were unable to
demonstrate that
the benefit of
these would be for
consumers.

(*) Parts of this text have been edited to ensure that confidential infor-
mation is not disclosed; those parts are enclosed in square brackets
and marked with an asterisk.
(1) Belonging to Telekom Austria.

exist

(14) A further factor affecting prices is network structure and
network capacity. While no major differences in the
for Mobilkom,
nationwide network
coverage
T-Mobile, ONE
difference
tele.ring,
emerges in relation to H3G, whose network currently
only covers around 50 % of the Austrian population. To
cover the remainder, H3G depends on a national roaming
agreement with Mobilkom. Hence, H3G cannot achieve
economies of scale outside its own network, and this has
consequently implications on its current pricing.

however,

and

(15) Post-transaction, T-Mobile intends

to make […] * of
tele.ring’s
sites and […] *. The transaction therefore
would not only […] *, but a benchmark analysis has
shown that
in available
capacity might have a negative impact on competition.

[…] *. Nevertheless,

[…] *

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(16) However, none of the remaining competitors appeared to
be in a position to take over tele.ring’s role after the
merger. H3G could until now not be regarded as a
fully-fledged network operator since it has only limited
network coverage and it depends on the national roaming
agreement with Mobilkom. Furthermore, the company is
restricted by the limited 3G/UMTS frequency spectrum
currently available to it. ONE has with its main brand
so far no track record for aggressive pricing. Recently it
has launched its discount brand YESSS! which offers
lower
limited range of mobile
telephony services and can therefore not be considered
as competing on the same level as the other operators.

tariffs but only a

(17) While

tele.ring’s

claim that

the parties

strategy of
aggressive pricing would come to an end soon, relevant
internal documents from tele.ring indicate […] *. In their
replies to the SO the parties further argue that […] *.
However, […] * have had no effect on tele.ring’s price
aggressive offers.

(18)

each network constitutes

In the wholesale market for call termination, the proposed
lead to competition concerns,
transaction would not
level. There is no
neither at horizontal nor at vertical
separate
overlap since
market and there is no risk of
in
particular as the pricing of these services is regulated by
the Austrian regulator and their price glides on a
downward path reaching a bottom line
in 2009
applicable to all operators.

foreclosure,

input

a

concluded multiple

(19) With respect to the wholesale of international roaming,
no competition concern would arise from the proposed
transaction since the parties but also their competitors
have
roaming
agreements that serve their customers in the provision
of outbound and inbound traffic. Although pre-selection
of roaming partners appears to happen, none of
the
Austrian network operators have reached a substantial
position in international roaming in Austria.

international

Conclusion

(20)

It therefore can be concluded that the proposed concen-
tration in its notified form is likely to lead to a significant
impediment of effective competition in the Austrian
market for the provision of mobile telecommunication
services to end customers.

4. Commitments offered by the Parties

(21)

to address

In order
the aforementioned competition
concerns in the market for the provision of mobile tele-
communication services to end customers,
the Parties
have submitted the undertakings described below.

(22)

shares,

In summary, the commitments provide that T-Mobile sells
two 5 MHz 3G/UMTS frequency blocks, which are
to competitors with
currently licensed to tele.ring,
to approval by the
smaller market
subject
Austrian Regulator and the Commission. At
least one
frequency package will go to H3G (1). Furthermore,
tele.ring’s
T-Mobile will dispose of a large number of
mobile communication sites, while only approximately
[10–20] * % of
remain within
T-Mobile for the integration of the tele.ring customers.
[…] * of
tele.ring’s sites will go to H3G and
About
[…] *
interested.
sites will go to ONE if ONE is
Furthermore, H3G will receive from T-Mobile […] *.

tele.ring’s

sites will

(23) T-Mobile and H3G have concluded a legally binding
‘Term Sheet’ on 28 February 2006 and have agreed on
the essential
the frequency
terms for
package and the mobile sites […] *.

the transfer of

5. Assessment of the commitments submitted

(24) As confirmed by the results of the market test conducted
by the Commission, these undertakings can be considered
sufficient to properly remedy the competition concerns in
the market
for the provision of mobile telecommuni-
cation services to end customers.

(25)

It can therefore be concluded that, on the basis of the
the notified
submitted by the Parties,
commitments
concentration will not lead to a significant impediment
of effective competition in the common market or in a
substantial part of it as to the market for the provision of
mobile telecommunication services to end customers.
the proposed concentration shall be declared
Hence,
compatible with the
to
Article 8(2) of the Merger Regulation and to Article 57
of the EEA Agreement.

common market pursuant

(1) See recital 24.