Summary of Commission Decision of 18 July 2019 declaring a concentration compatible with the internal market and the functioning of the EEA Agreement (Case M.8864 — Vodafone/Certain Liberty Global Assets) (notified under document number C(2019) 5187) (Only the English version is authentic) (Text with EEA relevance) 2019/C 382/07
Date: 2019-07-18
Institutions: Directorate-General for Competition, European Commission
Subjects: economic concentration, merger control, provision of services, retail trade, telecommunications, television








C_2019382EN.01001001.xml










11.11.2019   


EN


Official Journal of the European Union


C 382/10






Summary of Commission Decision
of 18 July 2019
declaring a concentration compatible with the internal market and the functioning of the EEA Agreement
(Case M.8864 — Vodafone/Certain Liberty Global Assets)


(notified under document number C(2019) 5187)


(Only the English version is authentic)
(Text with EEA relevance)
(2019/C 382/07)

On18 July 2019the 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, as the case may be in the form of a provisional version, 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/competition/elojade/isef/index.cfm?clear=1&policy_area_id=2
I.   INTRODUCTION









(1)


On 19 October 2018, the European Commission (the ‘Commission’) received notification of a proposed concentration pursuant to Article 4 of the Merger Regulation by which Vodafone Group Plc (‘Vodafone’ or the ‘Notifying Party’) intends to acquire sole control of Liberty Global Plc’s (‘Liberty Global’) telecommunications businesses in Czechia, Germany, Hungary and Romania (the ‘Target Business’) (the ‘Transaction’). Vodafone and the Target Business are designated hereinafter as the ‘Parties’.












(2)


The Decision is structured as follows. Section II describes the Parties. Section III explains why the Transaction constitutes a concentration. Section IV explains why the concentration brought about by the Transaction has a Union dimension. Section V describes the procedure followed in this case. Section VI describes the investigation undertaken by the Commission into the Transaction. Section VII defines the relevant product and geographic markets. Section VIII sets out the Commission’s assessment of whether the Transaction is likely to significantly impede effective competition, taking into account the Notifying Party’s efficiencies claims. Section IX sets out the Commission’s assessment of the commitments submitted by the Notifying Party. Section X contains the Commission’s conclusions.




II.   THE PARTIES









(3)


Vodafone is a group of companies active globally in the operation of mobile telecommunications networks and in the provision of mobile telecommunications services, such as voice telephony, messaging, data and content services. Some of its operating companies also provide cable television, fixed line telephony, broadband internet access and/or IPTV services (2). Within the EU, Vodafone is active in twelve Member States. In particular, in Czechia, Hungary and Romania, Vodafone provides primarily retail mobile telecommunications services and to a limited extent fixed telecommunications services. In Germany, Vodafone is active in the supply of retail mobile telecommunications services nationwide, owns the Kabel Deutschland cable network (which covers urban areas within 13 of the 16 Federal States) and offers fixed telecommunications services nationwide based on wholesale access to Deutsche Telekom AG’s (‘Deutsche Telekom’) fixed network.












(4)


Liberty Global owns and operates cable networks offering TV, broadband and voice telephony services worldwide and in particular in eleven Member States in the EU.












(5)


The Target Business comprises the operations of Liberty Global in each of Czechia, Germany, Hungary and Romania. In Czechia, the Target Business operates through UPC Česká republika, s.r.o., in Germany through Unitymedia GmbH (‘Unitymedia’), in Hungary through UPC Magyarország Kft and in Romania through UPC Romania S.R.L. (the Target Business in each of Czechia, Hungary and Romania is hereafter referred to as ‘UPC’). The Target Business provides fixed telephony, broadband and TV services through its cable networks. In Germany, the Target Business operates the Unitymedia cable network, which covers the three Federal States where Vodafone’s cable network is not present, that is North Rhine-Westphalia, Hesse and Baden-Wuerttemberg. In addition, the Target Business is active as a mobile virtual network operator in Germany and Hungary.




III.   THE TRANSACTION









(6)


By means of a sale and purchase agreement entered into on 9 May 2018, Vodafone will acquire 100 % of the shares of the corporate entities of the Target Business, which will become wholly-owned subsidiaries of Vodafone.












(7)


Therefore, in the Decision the Commission concluded that the Transaction consists of the acquisition of sole control by Vodafone over the Target Business and thus constitutes a concentration within the meaning of Article 3(1)(b) of the Merger Regulation.




IV.   EU DIMENSION









(8)


In the Decision the Commission concluded that the notified operation has an EU dimension pursuant to Article 1(2) of the Merger Regulation.




V.   THE PROCEDURE









(9)


The Transaction was notified to the Commission on 19 October 2018.












(10)


After a preliminary examination of the notification and based on the first phase market investigation, the Commission raised serious doubts as to the compatibility of the Transaction with the internal market and adopted a decision to initiate proceedings pursuant to Article 6(1)(c) of the Merger Regulation on 11 December 2018 (the ‘Article 6(1)(c) Decision’).












(11)


The Parties submitted their written comments on the Article 6(1)(c) Decision on 7 January 2019.












(12)


On 18 January 2019, the Commission adopted decisions pursuant to Article 11(3) of the Merger Regulation, addressed to Vodafone and Liberty Global, following their failure to provide complete information in response to a RFI from the Commission. Both decisions had the effect of suspending the time limits referred to in the first subparagraph of Article 10(3) of the Merger Regulation. Liberty Global and Vodafone complied with the Article 11(3) decision addressed to them, respectively, on 6 and 8 February 2019. Thus, the suspension of the time limits expired at the end of 8 February 2019.












(13)


On 25 March 2019, the Commission issued a Statement of Objections to the Notifying Party (the ‘Statement of Objections’). In the Statement of Objections, the Commission came to the preliminary view that the notified concentration would significantly impede effective competition in a substantial part of the internal market within the meaning of Article 2(3) of the Merger Regulation, as a result of (1) horizontal non-coordinated effects (i) in the retail supply of fixed internet access services in Germany; (ii) in the retail supply of 2P bundles including fixed telephony services and fixed internet access services in Germany; and (iii) in the market for the wholesale TV signal transmission in Germany; as well as (2) vertical non-coordinated effects in the retail supply of TV signal transmission to MDU customers in Germany or in the potential regional market corresponding to the Target Business’s footprint. (3)













(14)


The first access to file was granted to the Parties on 25 March 2019, the day after the issue of the Statement of Objections, and was subsequently provided on a regular basis. Access to confidential data and information relied upon by the Commission in the Statement of Objections was granted to the Parties’ economic advisors in accordance with the data room procedure.












(15)


On 8 April 2019, the Parties submitted their written reply to the Statement of Objections.












(16)


On 15 April 2019, pursuant to Article 10(3), second subparagraph, third sentence of the Merger Regulation, the Commission adopted a decision extending the periods set by the first subparagraph of Article 10(3) of the Merger Regulation by a total of 10 working days.












(17)


On 6 May 2019, the Notifying Party submitted commitments pursuant to Article 8(2) of the Merger Regulation in order to address the competition concerns identified by the Commission. On the following day, 7 May 2019, the Commission launched a market test of the commitments submitted by the Notifying Party on 6 May 2019.












(18)


On 23 May 2019, pursuant to Article 10(3), second subparagraph, third sentence of the Merger Regulation, the Commission adopted a second decision extending the periods set by the first subparagraph of Article 10(3) of the Merger Regulation by a total of 10 working days.












(19)


On 11 June 2019, following certain modifications, the Notifying Party submitted a final set of commitments (the ‘Final Commitments’).




VI.   RELEVANT MARKETS









(20)


In the Decision, the Commission considered that, for the assessment of the Transaction, the relevant markets are:






(a)


The retail markets for the supply of fixed telephony services in Germany, Czechia, Romania and Hungary, where the potential distinction between residential and non-residential customers is left open;










(b)


The retail markets for the supply of fixed internet access services in Germany, Czechia, Romania and Hungary, including all product types, distribution modes and speeds/bandwidths, to residential and small business customers;










(c)


The retail markets for the supply of mobile telecommunications services in Czechia, Germany, Hungary and Romania;










(d)


The retail markets for the supply of TV services in Czechia, Germany, Hungary and Romania, where the question whether other segmentations should be made ((i) type of technology used, (ii) pay TV versus FTA TV, and (iii) linear versus non-linear) can be left open;










(e)


The retail market for the supply of cable TV signal transmission to households in multi-dwelling-units (MDU customers) in Germany, where the question whether the scope is national or regional can be left open;










(f)


The retail market for the supply of TV signal transmission to households in single-dwelling-units (SDU customers) in Germany, where the question whether the market includes other transmission technologies such as satellite, IPTV and terrestrial and whether the scope is national or regional can be left open;










(g)


The potential retail markets for the supply of multiple play products (distinct from the supply of the underlying individual telecommunications products) in Czechia, Germany, Hungary and Romania;










(h)


The retail markets for the supply of business connectivity services in Czechia, Germany, Romania and Hungary, where the question whether other segmentations should be made ((i) broadband access for large business customers, (ii) leased lines, and (iii) VPN services) can be left open;










(i)


The retail markets for internet hosting services, worldwide, in the EEA or in Czechia, Germany, Romania and Hungary, where the question whether other segmentations (4) should be made can be left open;










(j)


The wholesale markets for the supply of call termination services on fixed networks in Czechia, Germany, Romania and Hungary;










(k)


The wholesale markets for the supply of leased lines in Czechia, Germany, Romania and Hungary where the question whether other segmentations should be made ((i) trunk vs. terminating segments, (ii) terminating leased lines with bandwidth above vs. below 2 Mbit/s or (iii) active vs. passive infrastructure) can be left open;










(l)


The wholesale markets for the supply of termination and hosting of calls to non-geographic numbers in Czechia and Germany;










(m)


The wholesale markets for the supply of domestic call transit on fixed networks in Czechia, Germany and Hungary;










(n)


The wholesale market for the supply of international carrier services worldwide;










(o)


The wholesale market for the supply of internet connectivity services worldwide or at regional level, where the question whether other segmentations should be made ((i) transit vs. peering; (ii) Tier 1transit providers vs. other transit providers) can be left open;










(p)


The wholesale markets for the supply of access and call origination on mobile networks in Czechia, Germany, Hungary and Romania;










(q)


The wholesale markets for the supply of call termination on each individual mobile networks in Czechia, Germany, Hungary and Romania;










(r)


The wholesale markets for international roaming services, comprising both terminating calls and originating calls, in Czechia, Germany, Hungary and Romania.










(s)


The market for the wholesale supply and acquisition of FTA TV channels in Czechia, Germany, Hungary and Romania;










(t)


The market for the wholesale supply and acquisition of pay TV channels in Czechia, Germany, Hungary and Romania;










(u)


The market for wholesale TV signal transmission via cable in Germany;










(v)


The market for intermediary TV signal delivery, including both fibre and cable, in Germany;










(w)


The market for licensing and acquisition of broadcasting rights for TV content in Germany, Romania, Hungary and Czechia (or in the respective linguistic areas), where the question whether other segmentations should be made ((i) pay TV versus FTA TV,(ii) linear versus non-linear broadcast, and (iii) by exhibition window) is left open.








VII.   COMPETITIVE ASSESSMENT

VII.1.   Germany

VII.1.1.   Introduction









(21)


In the Decision, the Commission found that the Transaction gives rise to the following horizontally affected markets in Germany:






(a)


The retail supply of fixed telephony services;










(b)


The retail supply of fixed internet access services;










(c)


The retail supply of mobile telecommunications services;










(d)


The retail supply of TV signal transmission to MDU customers;










(e)


The retail supply of TV signal transmission to SDU customers;










(f)


The retail supply of TV services;










(g)


The retail supply of multiple play 2P bundles including fixed telephony services and fixed internet access services;










(h)


The retail supply of multiple play 3P bundles including fixed telephony services, fixed internet access services and mobile telecommunications services;










(i)


The retail supply of multiple play 3P bundles including fixed telephony services, fixed internet access services and TV services;










(j)


The retail supply of multiple play 4P bundles including fixed telephony services, fixed internet access services, mobile telecommunications services and TV services;










(k)


The wholesale supply and acquisition of TV channels;










(l)


The wholesale supply of TV signal transmission.
















(22)


Furthermore, the Transaction gives rise to the following vertically affected markets in relation to the links between the following markets Germany:






(a)


The upstream market for the wholesale provision of call termination services on fixed networks and the downstream market for the retail provision of fixed telephony services;










(b)


The upstream market for the wholesale provision of call termination services on fixed networks and the downstream market for the retail provision of mobile telecommunications services;










(c)


The upstream market for wholesale access and call origination services on mobile networks and the downstream market for the retail supply of mobile telecommunications services;










(d)


The upstream market for wholesale access and call origination services on mobile networks and the downstream markets for the retail supply of multiple play 3P bundles including fixed telephony services, fixed internet access services and mobile telecommunications services;










(e)


The upstream market for wholesale access and call origination services on mobile networks and the downstream markets for the retail supply of multiple play 4P bundles including fixed telephony services, fixed internet access services, mobile telecommunications services and TV services;










(f)


The upstream market for the wholesale provision of call termination services on mobile networks and the downstream market for the retail provision of fixed telephony services;










(g)


The upstream market for the wholesale provision of call termination services on mobile networks and the downstream market for the retail provision of mobile telecommunications services;










(h)


The upstream market for the wholesale provision of leased lines and the downstream market for the retail provision of mobile telecommunications services;










(i)


The upstream market for wholesale intermediary TV signal delivery services and the downstream markets for the retail supply of TV signal transmission to MDU customers.
















(23)


The Commission also identified a number of markets in which the Transaction may have a significant impact in the meaning of section 6.4 of Annex 1 to the Implementing Regulation (5):






(a)


The retail supply of fixed telephony services, which is a neighbouring market closely related to the supply of retail TV services;










(b)


The retail supply of fixed internet access services, which is a neighbouring market closely related to the supply of retail TV services; and










(c)


The retail supply of mobile telecommunications services, which is a neighbouring market closely related to the supply of retail TV services.
















(24)


In the majority of the above mentioned markets, the Commission did not identify competition concerns, nor did it receive complaints. To the extent the Commission identified concerns or complaints were submitted by market participants, the Commission’s findings are summarised in the following sections.




VII.1.2.   Horizontal non-coordinated effects in the retail supply of fixed internet access services in Germany









(25)


In the Decision, the Commission concluded that the Transaction would significantly impede effective competition as a result of the elimination of the important competitive constraint exerted by the Parties pre-Transaction, especially in the Unitymedia’s cable footprint, and by creating a player with a share by subscribers of over 30 % (which would over 40 % in the footprint of Unitymedia and even higher in certain federal states and districts).












(26)


In particular, in the Decision the Commission found that Vodafone’s DSL business in Unitymedia’s footprint, which relies on wholesale access to Deutsche Telekom’s network, has constituted an important competitive constraint. This is based on the observation that Vodafone has been able to compete on par with Unitymedia and to operate more competitively than other providers operating on the basis of wholesale access, due to its unique characteristics (in particular, access to a network infrastructure allowing for more flexibility vis-à-vis Deutsche Telekom and thus lower costs).












(27)


Further, in the Decision the Commission found that the reduction of the competitive pressure resulting from the Transaction is not likely to be counteracted by other competitive constraints that will remain on the markets. Indeed, remaining players in the market are likely not to have the ability (Telefónica and other wholesale access seekers to Deutsche Telekom’s network, with the exception of United Internet) or the incentives (Deutsche Telekom and United Internet) to compete aggressively against the merged entity. (6)













(28)


On this basis, in the Decision the Commission considered that the elimination of the competitive constraints exerted by the Parties pre-Transaction, both on each other and on other competitors, is likely to significantly weaken competition and induce price increases, in particular in Unitymedia’s footprint, where the Parties compete closely with each other.












(29)


As regards the efficiency claims submitted by the Parties (including variable costs savings resulting from migration of Vodafone’s DSL customers from Deutsche Telekom’s network to Unitymedia’s), the Decision concluded that they do not meet the three cumulative criteria of verifiability, merger specificity and benefit to consumers set out in the Horizontal Merger Guidelines.




VII.1.3.   Horizontal non-coordinated effects in the retail supply of TV signal transmission and TV services in Germany









(30)


In the Decision the Commission assessed the likelihood of anticompetitive horizontal non-coordinated effects (i) in the markets for the retail supply of TV signal transmission to MDU and SDU customers in Germany or in the potential regional markets corresponding to the cable footprint of the Parties, and (ii) in the nationwide market for the retail supply of TV services (together, ‘TV-related markets’).












(31)


The Commission concluded that the Transaction is not likely to significantly impede effective competition in any of the TV-related markets in Germany as a result of horizontal non-coordinated effects. This is in particular because there is no merger-specific change as the Parties are mainly active within their respective cable footprints. No evidence on the Commission’s file suggested that there is a loss of direct, indirect or potential competition as a result of the Transaction. Moreover, the Commission considered that the Transaction will not lead to a weakening of the Parties’ competitors.












(32)


Specifically with regard to potential competition between the Parties, the Commission found that neither Vodafone nor Unitymedia has overbuilt the other Party’s cable network in the past. Therefore, any finding of potential competition would have to clearly set out why the Commission considered that the Parties are likely to depart from their previous conduct. However, the Commission has not identified a coherent body of evidence that would suggest that either Party’s expansion into the other Party’s footprint would be likely or reasonably predictable absent the Transaction.












(33)


In Unitymedia’s footprint, there is a small overlap arising from Vodafone’s IPTV and OTT TV products. However, in light of the limited market position of these products, there is no significant loss of actual direct competition between the Parties.




VII.1.4.   Horizontal non-coordinated effects in the market for the wholesale TV signal transmission in Germany









(34)


In the Decision, the Commission found that, post Transaction, the Parties’ market power in the wholesale supply of TV signal transmission in Germany would increase. It concludes that (i) in a possible market limited to the wholesale supply of TV signal transmission via cable, the combined market share of the Parties is over 70 % both at national level and in the merged entity’s footprint (in terms of households connected), and (ii) there are elements suggesting that larger suppliers of TV signal transmission have the ability and the incentives to negotiate better terms than smaller competitors.












(35)


In the Decision, the Commission identified the following possible harmful effects resulting from such increased market power: first, the possibility that the merged entity would impose unreasonable conditions on TV broadcasters; second, the possibility that the merged entity would hinder the broadcasters’ ability to provide additional and innovative services (such as, Over-The-Top or OTT, HbbTV).




VII.1.5.   Horizontal non-coordinated effects in the retail market for Multiple Play Bundles in Germany









(36)


In the Decision the Commission assessed the effects of the Transaction of in the hypothetical bundle markets that are the most prevailing in Germany. Other than the dual-play bundles of fixed internet access services and fixed telephony, these markets are the triple bundles of fixed telephony, internet and TV services; the triple bundles of fixed telephony, internet and mobile services; and the quadruple bundles of fixed telephony, internet, TV and mobile services.












(37)


The Decision concluded that findings in relation to the horizontal non-coordinated effects of the Transaction in the retail supply of fixed internet access services in Germany equally apply to the retail supply of dual-play bundles of fixed internet access services and fixed telephony, because of the strong overlap between the two markets.












(38)


In relation to the other types of bundles the Commission found that Transaction was not likely to give rise to a significant impediment of effective competition in particular because of the limited combined market shares of the Parties and increment (triple bundles of fixed telephony, internet and mobile services and quadruple bundles) and/or because of the negligible overlap of the Parties’ activities in the supply of TV services




VII.1.6.   Foreclosure of retail suppliers of TV signal transmission to MDU customers in Germany









(39)


In the Decision the Commission assessed the likelihood of anticompetitive vertical non-coordinated effects in the market for the retail supply of TV signal transmission to MDU customers in Germany as well as in the potential regional markets corresponding to the cable footprint of the Parties. The Commission found that there is no merger specific effect in relation to the Parties’ ability or incentive to foreclose downstream retail competitors via the market for intermediary TV signal delivery. The Transaction will not create any new linkages between different levels of the supply chain that would not exist in the absence of the Transaction. This is because both Vodafone and Unitymedia are already active both upstream (in separate geographic markets) in the provision of Level 3 signal to Level 4 providers, and downstream in the provision of retail TV signal transmission to MDU customers. Where these vertical links exist, the Transaction does not lead to a change in the market structure at the upstream or downstream levels and hence does not result in an increase in market power.












(40)


In this context, in particular, the Commission considered that the Transaction would not lead to a significant impediment of effective competition as a result of vertical non-coordinated effects to the detriment of Tele Columbus, arising from the possible transposition of Vodafone’s commercial policy into Unitymedia footprint. Even if the merged entity had the merger-specific ability and incentive to foreclose Tele Columbus in Unitymedia’s footprint, there would be no significant impact on effective competition given Tele Columbus’ limited activities in Unitymedia’s footprint and its lack of infrastructure expansion.




VII.1.7.   Foreclosure of retail suppliers of mobile telecommunications services in Germany









(41)


In the Decision the Commission assessed the likelihood of anticompetitive vertical non-coordinated effects in the market for the retail supply of mobile telecommunication services and FMC bundles. The Commission found that the merged entity would not have the merger specific ability or incentive to foreclose competing providers of mobile telecommunication services in light of Unitymedia’s absence from the upstream market and marginal position in the downstream market.












(42)


Even if the merged entity had the merger-specific ability and incentive, the Commission considered that there would be no significant impact on effective competition. The largest non-MNOs active in Germany are protected as they hosted by multiple MNOs. Moreover, non-MNOs will continue to benefit from the obligations set out by BNetzA as well as the commitments accepted by the Commission in Case M.7018 - Telefónica Deutschland /E-Plus. Finally, in any case, non-MNOs generally do not exert the same degree of competitive pressure as MNOs, mainly because of their dependency on wholesale conditions. They are, therefore, unable to effectively constrain the competitive behaviour of MNOs on the retail market.












(43)


In this context, in particular, the Commission considered that the Transaction would not lead to a significant impediment of effective competition as a result of vertical non-coordinated effects to the detriment of FMC players, arising from an increased incentive to foreclose competitors with fixed network infrastructure (e.g. city carriers). The Commission considered that such players have a negligible position with regard to mobile telecommunication services and would be able to effectively compete with regard to fixed telecommunications services even if the merged entity were to withhold wholesale access and origination services on mobile networks vis-à-vis such players




VII.1.8.   Conglomerate effects in Germany









(44)


During the merger review proceedings the Commission received complaints whereby, post-Transaction, that the merged entity, through the offering of multiple play packages including TV services, will have the ability and incentive to foreclose competing operators in other telecommunications services.












(45)


In the Decision the Commission found that any conglomerate effect arising from the Transaction is unlikely to significantly impede effective competition. This is in particular because, multiple play offers are still at an early stage in Germany and the up-take of such offers is not going to grow significantly in the next few years. Further, the Transaction is likely to have only a minimal acceleration effect in this respect. Indeed, both the Parties already sell bundles and the Transaction is not going to change substantially their ability to sell bundles, as well as their ability and incentives to foreclose competitors.




VII.2.   Czechia

VII.2.1.   Introduction









(46)


In the Decision, the Commission found that the Parties’ activities in Czechia are largely complementary. The Commission found that the Transaction does not give rise to any horizontally affected markets, because either the Parties’ combined market share is below 20 %, or the Parties’ networks do not technically overlap. Additionally, the Commission considered, but eventually dismissed, the possibility that Vodafone could be considered an entrant in the retail markets for TV services or for multiple play bundles comprising fixed telecommunications and TV services.












(47)


As regards vertical relationships, the Transaction gives rise to three technically affected vertical relationships (involving upstream, the wholesale provision of call termination services on mobile networks and on fixed networks, and downstream the retail markets for the provision of fixed telephony services, and mobile telecommunications services). The Commission found that those vertical relationships would not give rise to a significant impediment to effective competition, because of lack of market power either upstream or downstream.












(48)


Finally, the Commission received a number of complaints concerning possible conglomerate effects of the Transaction. The Commission’s findings in this respect are summarised in the following section.




VII.2.2.   Conglomerate effects









(49)


Several respondent to the market investigation raised the possibility that, post-Transaction, the merged entity would be able to bundle UPC’s high-speed fixed Internet access services (with or without UPC’s Pay TV services) with Vodafone’s mobile telecommunications services, resulting in foreclosure of standalone providers of fixed or mobile telecommunications services. This would be possible because UPC’s cable network can deliver speeds that are allegedly higher than its competitors’, thus conferring UPC dominance in the market.












(50)


In the Decision, the Commission found that the merged entity would not have neither the ability nor the incentive to engage in such foreclosure strategy. As regards ability, the Commission found that UPC does not have market power in fixed internet access services in Czechia. As regards incentives, the Commission found that the merged entity’s short-term losses are unlikely to be compensated by long-term profits, thus making predation unprofitable. Finally, the Commission found that any hypothetical foreclosure strategy would not have any significant effect on the market, because UPC’s network only covers a relatively small portion of the Czech’s households.












(51)


Additionally, the Commission also dismissed possible concerns that the merged entity could leverage its position in the retail market for TV services (or multiple play bundles comprising TV, fixed internet access) into the retail market for mobile telecommunications services. This is because the merged entity lacks market power in the retail market for TV services, and because multiple play bundles comprising TV services and mobile telecommunications services are not popular in Czechia.




VII.3.   Hungary









(52)


In Hungary, only the market for retail supply of telecommunications services is horizontally affected as a result of the Transaction. One respondent to the market investigation submitted that the Transaction would lead to anticompetitive effects in the retail market for mobile telecommunications services in Hungary, as a result of the removal of UPC as a standalone MVNO. In the Decision, the Commission found that the Transaction will bring about only a negligible increment in Vodafone’s market share. Most respondents to the market investigation considered that UPC does not exercise any meaningful competitive pressure on Vodafone. Finally, the Commission noted that during its investigation of the Transaction, Digi/Invitel entered the retail market for mobile telecommunications services in Hungary as an MNO. Therefore, the Commission concluded that the Transaction would not significantly impede effective competition due to horizontal non-coordinated effects as regards the retail market for mobile telecommunications services in Hungary.












(53)


The Transaction also gives rise to a number of vertically affected markets, for which the Commission considered that the Transaction would not significantly impede effective competition. In particular, a respondent to the market investigation complained that the merged entity could foreclose it from the market for the retail provision of mobile telecommunications services, by withholding its supply of leased lines. However, the Commission considered that the merged entity will not have the ability or the incentive to foreclose the complainant, or any other providers of mobile telecommunications services. This is because other suppliers of leased lines (or mobile backhaul) are active on this market, and thus UPC has no market power.












(54)


The Commission also assessed the likely impact of the Transaction on the merged entity’s ability and incentive to foreclose standalone providers of mobile telecommunications, fixed telephony, internet access, or TV services, by bundling its fixed and mobile telecommunications offers as a result of conglomerate effects. However, the Commission concluded that the Transaction would not significantly impede effective competition due to conglomerate effects in Hungary, mainly because neither of the Parties have market power in any of the markets in which they are active.




VII.4.   Romania









(55)


In Romania, there are no horizontally affected markets. The Transaction gives rise to a number of vertically affected markets, for which the Commission considered that the Transaction would not significantly impede effective competition as a result of any non-coordinated effects.












(56)


The Commission also assessed the likely impact of the Transaction on the merged entity’s ability and incentive to foreclose standalone providers of mobile telecommunications, fixed telephony, internet access, or TV services, by bundling its fixed and mobile telecommunications offers. However, the Commission concluded that the Transaction would not significantly impede effective competition due to conglomerate effects in Romania, mainly because neither of the Parties have market power in any of the markets in which they are active.




VII.5.   International Markets









(57)


The Commission assessed the potential impact that the Transaction could have on telecommunications markets whose geographic scope is broader than national. In this regard, the Commission found that the Transaction would not give rise to a significant impediment to effective competition with regard to (i) the wholesale supply of international carrier services and (ii) the wholesale supply of internet connectivity services, where only Vodafone is active. In fact, in both markets Vodafone’s market share is limited, and other competitors will remain active post-Transaction.




VIII.   COMMITMENTS









(58)


To be acceptable, the proposed commitments must be capable of rendering a concentration compatible with the internal market as they prevent a significant impediment to effective competition in all relevant markets in which competition concerns were identified. In the case assessed in the Decision, the commitments needed to eliminate the competition concerns identified by the Commission with respect to: (i) horizontal non-coordinated effects in the retail supply of fixed internet access services in Germany, (ii) horizontal non-coordinated effects in the retail supply of 2P bundles including fixed telephony services and fixed internet access service in Germany and (iii) horizontal non-coordinated effects in the market for wholesale TV signal transmission in Germany.
VIII.1.   Description of the Final Commitments









(59)


The Final Commitments comprise four elements:






(a)


Wholesale Cable Broadband Access: a fix-it-first commitment to provide a New Cable Provider with access to the merged entity’s cable network in order for the New Cable Provider to be able to offer retail fixed Internet access services (and, if desired, fixed voice services) and its own or third parties’ OTT TV services;










(b)


OTT Commitment: commitment not to contractually restrict, directly or indirectly, the possibility for broadcasters that are carried on the merged entity’s TV platform to distribute their content via an OTT service; and a commitment to maintain sufficient direct interconnection capacity between its Internet network covering Germany and third-party providers of Internet interconnectivity (transit) services.










(c)


Feed-in Fee Commitment: commitment not to increase feed-in fees paid by FTA broadcasters.










(d)


HbbTV Commitment: commitment to continue to carry the HbbTV signal of FTA broadcasters.
















(60)


Vodafone and Telefónica entered into a definitive agreement for the Wholesale Cable Broadband Access on 17 April 2019. Subsequently, an amendment to the agreement was signed.
VIII.1.1.   Wholesale Cable Broadband Access









(61)


Vodafone would grant one New Cable Provider (Telefónica) wholesale access to the combined cable networks of Vodafone and Unitymedia. The technical access to the merged entity’s network would happen at number handover (or interconnection) points.












(62)


As regards the provision of Internet access services, the New Cable Provider will be able to choose among three different speed profiles, 50/4 (download/upload speed in Mbps), 100/6, and 300/25, with the possibility to increase the download speed to 500 Mbps after some time (provided that certain conditions are met). The Wholesale Cable Broadband Access also allows for the provision of fixed telephony and OTT TV. The Final Commitments have a minimum term duration, with the possibility of an extension.












(63)


The pricing structure of the Wholesale Cable Broadband Access closely follows the financial conditions for the regulated wholesale access to Deutsche Telekom’s xDSL network (so-called ‘Kontingentmodell’): according to this risk-sharing pricing structure, the New Cable Provider (or the access seeker, in the context of Deutsche Telekom’s regulated offer) makes an upfront payment and volume commitment, in return for monthly costs for ongoing access that is lower than Deutsche Telekom’s standard rate card.




VIII.1.2.   OTT Commitment









(64)


Pursuant to the OTT Commitment, Vodafone would commit not to restrict OTT distribution of content by broadcasters of linear TV channels and to maintain a minimum level of interconnection capacity into Vodafone’s IP network in Germany. In particular, Vodafone would commit:






(a)


not to enter into any agreement with a broadcaster that would directly or indirectly restrict the broadcaster’s ability to offer OTT TV services to third parties and/or end users. To the extent that any such restrictions exist in their current contracts with broadcasters in Germany, they will not be enforced or renewed;










(b)


to provide sufficient interconnection capacity to allow its broadband customers to access any OTT TV service in Germany. To ensure transparency in relation to interconnection capacity and traffic, Vodafone will publish relevant information on a monthly basis;










(c)


to appoint a monitoring trustee, to be approved by the Commission, to review new and existing agreements with broadcasters as well as to verify that sufficient interconnection capacity is provided.
















(65)


The OTT Commitment would apply for a period of eight years.












(66)


The Wholesale Cable Broadband Access and the OTT Commitment would allow the New Cable Provider to offer high speed broadband over which owned or third-party OTT TV services could be distributed, throughout the combined Unitymedia and Vodafone cable footprint.




VIII.1.3.   Feed-in Fee Commitment









(67)


Under the Feed-in Fee Commitment, Vodafone seeks to ensure that it will not have the ability to increase the feed-in fees paid by broadcasters. For this purpose, Vodafone shall send no later than four weeks from the date of the adoption of the Decision an irrevocable offer (annexed to Final Commitments) to all FTA broadcasters setting out Vodafone’s following obligations:






(a)


Vodafone and Unitymedia will not increase the fees per connected household;










(b)


Vodafone and/or Unitymedia may, with the broadcaster’s consent, amend the structure or other aspects of the feed-in fees, e.g. for purposes of network integration. Under any amended feed-in contract, the feed-in fees will not exceed the sum of the feed-in fees due under each of Vodafone’s and Unitymedia’s current rate cards for feed-in fees (annexed to the commitment). This obligation also applies if the feed-in contract has ended and Vodafone and/or Unitymedia enter into a new feed-in agreement or agree on the feed-in of additional TV programs.










(c)


Where the merged entity enters into a feed-in agreement with a FTA broadcaster that does not currently have a feed-in agreement with one of the Parties, the feed-in fees included in that feed-in agreement shall not exceed the rates set out in Vodafone’s and Unitymedia’s standard rates cards for FTA channels.
















(68)


All other provisions of the feed-in agreements remain unaffected by the Feed-in Fee Commitment.




VIII.1.4.   HbbTV Commitment









(69)


Under the HbbTV Commitment, Vodafone seeks to ensure that it will have no ability to refuse to continue carrying the HbbTV signal of FTA broadcasters over its Cable Network. For this purpose, Vodafone shall send no later than four weeks from the date of the adoption of the Decision an irrevocable offer (annexed to the Final Commitments) to all FTA broadcasters setting out Vodafone’s following obligations:












(70)


Vodafone and Unitymedia will continue to transmit hybrid broadcast broadband TV (‘HbbTV’) signals together with any TV programs Vodafone transmits in DVB-C format.












(71)


Vodafone and/or Unitymedia may, with the broadcaster’s consent, amend any obligation to transmit HbbTV signals. Under any amended feed-in contract providing for the transmission of TV signal in the DVB-C standard, Vodafone and Unitymedia will transmit the broadcaster’s HbbTV signals in their cable networks at least under the following minimum technical terms and without charging any fees for such transmission: HbbTV signal consists of AIT (application information tables) and stream events (in the transmission standard DSM-CC), which will be included in the HbbTV signal. The HbbTV signal may have a maximum data rate of 15 Kbit/s per TV program (SD or HD). The obligation also applies to any agreement to transmit HbbTV signal together with TV programs in the DVB-C standard that is not currently covered by an agreement to transmit HbbTV or upon expiry of such agreement and/or feed-in contract.












(72)


The obligation to transmit HbbTV signals in the cable network does not include any obligation of Vodafone or Unitymedia in connection with the functionality of their or any third parties’ customer premises equipment, in particular, no obligation to design or change customer premises equipment in such a way that they react to HbbTV signals.












(73)


In terms of duration, the Feed-in Fee and HbbTV Commitment are offered for a period of eight years from the date of the adoption of the Decision.








VIII.2.   Assessment of the Final Commitments









(74)


In the Decision the Commission concluded that the Final Commitments address the competition issues raised by the Transaction in their entirety. The Commission also concluded that the Final Commitments are capable of being implemented effectively within a short period of time.












(75)


The Commission noted that the Wholesale Cable Broadband Access Commitment creates a significantly strengthened national retail competitor in the provision of fixed internet access and fixed telephony services in Germany. By accelerating the uptake of high-speed internet connections, it would also benefit the distribution of OTT TV services by providers such as broadcasters, third party OTT platforms or the New Cable Providers’ own OTT platform. Overall, the Commission, therefore, considered that the scope of the Wholesale Cable Broadband Access Commitment is sufficiently comprehensive to eliminate competition concerns in the retail supply of fixed internet access services (and 2P bundles) in Germany and contributes to the elimination of competition concerns in the market for wholesale TV signal transmission in Germany.












(76)


With the OTT Commitment, Vodafone commits to terminate any agreement between the Parties and TV broadcasters that restricts the TV broadcasters’ ability to offer their channels and content via an OTT service in Germany. Vodafone also commits that the Parties will not enter into such agreements in the future. Overall, the Commission, therefore, considered that the scope of the OTT Commitment is sufficiently comprehensive as (i) to address the competition concern related to the merged entity’s ability to hinder the provision of OTT services by TV broadcasters, and (ii) to mitigate the increased market power of the merged entity vis-à-vis Pay TV broadcasters, so that the breadth and the quality of the TV offer would not be significantly reduced to the detriment of the retail customers.












(77)


With the Feed-in Fee Commitment, Vodafone commits not to increase the feed-in fees paid by FTA broadcasters for the transmission of linear TV channels via Vodafone’s cable network in Germany for the next eight years. The Commission considered that the Feed-in Fee Commitment appears able to address the competition concern related to the merged entity’s ability to reduce the breadth and the quality of the TV offer to retail customers, through the imposition of unreasonable conditions on FTA TV broadcasters.












(78)


The Commission further noted that the HbbTV Commitment will allow the continued transmission of FTA broadcasters’ hybrid broadcast broadband TV signal via the merged entity’s cable network in Germany. The Commission therefore considered that the HbbTV commitment is adequate to eliminate the concern that the merged entity could hinder the broadcasters’ ability to provide additional and innovative services through HbbTV signal.




VIII.3.   Assessment of Telefónica as New Cable Provider









(79)


The Commission considered that Telefónica complies with the standard purchaser requirements detailed in the Remedies Notice in terms of independence, financial resources and the absence of prima facie competition concerns.












(80)


In particular, the Commission considered that, based on the Wholesale Cable Broadband Access Commitment, Telefónica will have the ability and the incentive to operate as a viable and active competitive force in competition with the merged entity and other competitors in the markets for the replay supply of fixed internet access service, 2P bundles including fixed internet access service and fixed telephony services and retail TV services.












(81)


Moreover, in light of Telefónica’s limited current market position, the Commission considered that the strengthening of Telefónica as a result of the Wholesale Cable Broadband Access Commitment would not raise any competition concerns. Moreover, while the commercial terms under Wholesale Cable Broadband Access Commitment are more attractive than under Deutsche Telekom’s Kontingentmodell improving Telefónica’s business case, the increase in Telefónica’s competitiveness is not of the sort that it would create competition problems in itself. In particular, the Commission considered that the Wholesale Cable Broadband Access Commitment would not have a negative impact on third parties’ fibre roll out or give rise to an acceleration of fixed-mobile convergence in Germany.












(82)


The Commission also reviewed the agreement between Vodafone and Telefónica and concluded that the terms comply with the requirements of the Final Commitments.








IX.   CONCLUSION AND PROPOSAL









(83)


For the reasons mentioned above, in the Decision the Commission concluded that, subject to compliance with the commitments given by the Notifying Party, the Transaction would not significantly impede effective competition in the internal market or in a substantial part of it. Consequently, the Decision declares the concentration compatible with the internal market, in accordance with Articles 2(2) and Article 8(2) of the Merger Regulation.






(1)  OJ L 24, 29.1.2004, p. 1.

(2)  IPTV is the abbreviation for internet Protocol TV; it is a system through which television services are delivered using the internet protocol over a packet-switched network such as the internet, instead of being delivered through traditional terrestrial, satellite signal and cable television formats.

(3)  Cable ‘footprint’ (also referred to as cable ‘territory’) refers to the scope of the cable network (in the sense of technical reach) and does not refer to all households in the Federal States in which their cable networks are located.

(4)  That is: (i) the local (limited to the area where the web-hosting centre is located) supply of basic co-location services such as connectivity, power, and the facilities; (ii) the national supply of shared and dedicated hosting consisting of hosting a customer’s web-site on the web host’s servers and providing the necessary support applications; (iii) the national, possibly cross-border regional, supply of managed services to outsource complex enterprise applications and support infrastructure, including ‘front-end’ and ‘back-office’ applications hosted on the providers’ platforms, and (iv) the national supply of content delivery services.

(5)  Commission Implementing Regulation (EU) No 1269/2013 of 5 December 2013 amending Regulation (EC) No 802/2004 implementing Council Regulation (EC) No 139/2004 on the control of concentrations between undertakings (OJ L 336, 14.12.2013, p. 1).

(6)  In the market investigation, third parties claimed that the migration of Vodafone’s customers currently on Deutsche Telekom’s network to the merged entity’s cable network would reduce these players’ (essentially comprising Deutsche Telekom and certain city carriers) incentive to invest in fibre roll-out. In the Decision the Commission concluded that no evidence in the its file suggests that, post-Transaction, in particular Deutsche Telekom and city carriers would change their speed of fibre roll-out due to a negative impact of the Transaction on their ability and financial incentives to undertake the related investments.