Source: EURLEX
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15 . 12 . 95 | EN Official Journal of the European Communities No C 337 / 13

THE COMMISSION'S INTENTIONS within six weeks from the publication of this notice to
the following address, quoting the reference TV / 35 . 337
— Atlas ':

31 . On the basis of the foregoing, the Commission
intends to take a favourable position on the notified European Commission,
transactions under the competition rules of the EC Directorate-General for
Treaty and under Article 53 of the EEA Agreement and Directorate for
to grant Atlas an individual exemption pursuant to Multimedia,
Article 85 ( 3 ) of the EC Treaty and Article 53 ( 3 ) of the Rue de la Loi / Wetstraat

EEA Agreement . Before doing so, the Commission
invites interested third parties to send their observations

Directorate-General for Competition ( DG IV ),
Directorate for Information, Communication and
Multimedia,
Rue de la Loi / Wetstraat 200,
B-1049 Brussels .

Fax : ( 32-2 ) 296 98 19 .

Notice pursuant to Article 19 ( 3 ) of Council Regulation No 17 (') and Article 3 of Protocol 21
of the European Economic Area Agreement concerning a request for negative clearance or an
exemption pursuant to Article 85 ( 3 ) of the EC Treaty and Article 53 ( 3 ) of the EEA
Agreement

Case No IY / 35.617 — Phoenix

( 95 / C 337 / 03 )

( Text with EEA relevance )

INTRODUCTION

1 . The Phoenix transaction was notified to the

Commission on 29 June 1995 . The Phoenix transaction
is linked to a separate transaction bringing about a joint
venture, Atlas, owned 50 % by France Telecom ( FT )

and 50 % by Deutsche Telekom ( DT ), given that Atlas
is a parent to the joint venture entities created pursuant
to the Phoenix agreements . The Atlas agreements,
notified on 16 December 1994, are described in a
separate notice published in this Official Journal of the
European Communities .

2 . The Phoenix agreements comprise two mam trans ­
actions involving two European Union telecommuni ­
cations organizations ( TO ) and one US telecommuni ­
cations operator :

( i ) each of FT and DT is to acquire an equity stake of

approximately 10 % in Sprint worth US$ 4,2 billion .
Both FT and DT will obtain proportionate board
representation and investor protection as minority
shareholders in Sprint ; as detailed below, provisions
have been included in the Investment Agreement to
prevent DT and / or FT, either separately or jointly,
from controlling or influencing Sprint ; and

( ii ) Atlas and Sprint are to create a joint venture,
Phoenix, for the provision of enhanced and
value-added global telecommunications services and

other telecommunications services to corporate users,
carriers and consumers . The Phoenix joint venture
will be structured into several operational entities
under the strategic supervision of a Global Venture
Board ( collectively referred to as the ' Phoenix
entities '). One such entity will provide Phoenix
services worldwide except in Europe and the United
States ( the ' Rest of World ( ROW ) entity '), a second
entity will provide Phoenix services in Europe except
in France and Germany ( the ' Rest of Europe ( ROE )
entity ') and a third entity will operate the global
backbone network of Phoenix ( the ' Global Backbone
Network ( GBN ) entity 5 ). The Global Venture Board
shall take decisions on matters of policy only and
will not engage in the management of individual
operational entities created pursuant to the Phoenix

agreements .

A. THE PARTIES

prevent DT and / or FT, either separately or jointly, 3 . Deutsche Telekom AG ( DT ) and France Telecom
from controlling or influencing Sprint ; and ( FT ) are the German and French public TO respectively .

DT is the world 's second-largest and FT the world 's
fourth-largest telecommunications carrier in terms of
revenue . Details of both undertakings are provided in the
notice on the Atlas venture published in this issue of the
O OJ No 13, 21 . 2 . 1962, p . 204 / 62 . Official Journal .

No C 337 / 14 fENl Official Journal of the European Communities 15 . 12 . 95

4 . Sprint Corporation ( Sprint ) is a holding company The market for carrier 's carrier services
in the United States . The Sprint group of companies is a
diversified telecommunications group providing global
voice, data and video-conferencing services and related

9 . The market for carrier 's carrier

products . Sprint 's main subsidiaries provide local ( US )

the lease of transmission capacity

exchange, cellular wireless as well as domestic ( US ) and
international long-distance telecommunications services . related services to third-party
Other Sprint subsidiaries engage in wholesale carriers . Along with liberalization
distribution of telecommunications products and the telecommunications markets, demand
publishing and marketing of white and yellow page old quality and traffic new carriers transportation . In this capacity
telephone directories . Worldwide turnover for Sprint in

1994 was ECU 10,9 billion ; Sprint is the world 's 11th
largest telecommunications carrier in terms of revenues .

B. THE RELEVANT MARKET

9 . The market for carrier 's carrier services comprises
the lease of transmission capacity and the provision of
related services to third-party telecommunications traffic
carriers . Along with liberalization and globalization of
telecommunications markets, demand for efficient, high ­
quality traffic transportation capacity has risen among
old and new carriers . In this connection, the traditional
model of separate arrangements with other individual
carriers is increasingly challenged by players with global
network infrastructure that offer carriers an array of
services . The most relevant of such services are :

( a ) switched transit, i.e. transport of traffic over bilateral

1 . Creation of the Phoenix entities facilities between the originating carrier, the transit

carrier and the terminating carrier ; neither the orig ­
inating carrier nor the terminating carrier need
5 . The Phoenix entities will address several product bilateral facilities between themselves, but only with
and geographic markets, namely ( i ) the markets for the transit carrier ;
value-added telecommunications network services to
corporate users both globally and regionally, ( ii ) the
market for traveller services and ( iii ) the market for
so-called carrier 's carrier services . ( b ) dedicated permanent, dedicated transit, i.e. facilities transport through of the traffic domestic over
network of the transit carrier ; facilities used for this
purpose may include discrete voice circuits or a high ­

1 . Product markets bandwidth digital circuit that can be used for both

voice and data services ; and

1 . Creation of the Phoenix entities

1 . Product markets

The markets for value-added telecommunications network

services

6 . The Phoenix entities will be active on the same

markets for both advanced telecommunications services
to corporate users and standardized low-level packet ­
switched data communications services described in the
separate notice on the Atlas venture published in this
issue of the Official Journal .

The market for traveller services

7 . The market for traveller telecommunications
services comprises offerings that meet the demand of
individuals who are away from their normal location,
either at home or at work . Among the most relevant of
these offerings are those offered by the Phoenix entities,
namely calling cards ( i.e. prepaid cards with or without a
code and postpaid cards ), including those in combination
with credit cards and other branded service cards

(' affinity cards ').

8 . Customers for traveller services include both

business travellers and other travellers . In the card
business targeted by Phoenix, the former are by far the
largest group of buyers . Business travellers are generally
intensive card users, the main incentive for card usage
being the possibility to avoid paying hotel telephone
surcharges .

( c ) traffic hubbing offerings, where the provider takes

care of all or part of international connections ; these
offerings are typically designed for emerging
carriers, who are interconnected with the provider
over bilateral facilities and whose international traffic
is merged with other traffic on the provider 's global
network .

As international telecommunications markets are

deregulated, demand for carrier 's carrier services is
increasingly driven by alternative carriers concerned with
entrusting the incumbent TO with their international
traffic, for reasons such as technical dependency and
commercial sensitivity of customer information .

10 . Purchasers of carrier 's carrier services include
established and emerging carriers . Both groups of clients
have substantial bargaining power and are highly
competition-sensitive . Among the latter group, one may
distinguish facilities-based carriers that provide telecom ­
munications services over alternative infrastructure or

cable television networks seeking greater efficiency in the
transport of international client traffic, while non
facilities-based carriers seek to preserve a competitive
advantage by avoiding dependence on a local TO for
international client traffic .

15 . 12 . 95 | EN Official Journal of the European Communities No C 337 / 15

2 . Geographic markets on the coordination between Atlas and the ROE entity
as the competent Phoenix entity in that region .

11 . Along the lines of the Commission 's findings in its
BT-MCI decision ( 2 ), the geographic scope of certain The market for traveller services
markets targeted by the Phoenix entities as well as the
market that must be considered in respect of the
investment of DT and FT in Sprint is international and 14 . Along with the
even global . Although national borders subsist for many market for traveller services
services, strategic alliances like Phoenix are built not global ; worldwide travellers
only in anticipation of a market unaffected by national include a single bill and
boundaries but even with the express purpose to offer voice messaging, voice response
large global telecommunications users seamless Geographic limitations of
end-to-end services anywhere by overcoming the diffi ­ offerings are generally due to
culties inherent in the current market structure split to be overcome in the near
along national borders . However, the service offerings of bility of mobile communications
the Phoenix entities will be relevant to different existing prepaid cards without an
geographic markets . trated at 7 above

14 . Along with the globalization of the economy the
market for traveller services appears to be increasingly
global ; worldwide travellers demand offerings which
include a single bill and integrated functions such as
voice messaging, voice response and information systems .

users Geographic limitations of current traveller service
end-to-end services anywhere by overcoming the diffi ­ offerings are generally due to technical shortcomings set
culties inherent in the current market structure split to be overcome in the near future, such as the incompati ­
along national borders . However, the service offerings of bility of mobile communications systems or differences in
the Phoenix entities will be relevant to different existing prepaid cards without an individual user code . As illus ­
geographic markets . trated at paragraph 7 above, none of the services

targeted by the Phoenix entities is affected by these
shortcomings ; however, the geographic scope of the
traveller services offered by Phoenix can be left open for
the purposes of this case, as the finding of narrow
The markets for value-added telecommunications network
geographic markets would not affect the assessment of
services the parties ' competitive position .

12 . As described in the separate Atlas notice, demand The market for carrier 's carrier services
by corporate users for advanced services exists in at least
three distinct geographic markets, namely at a global, a
cross-border regional and a national level . Phoenix
services will have global reach given that each of DT, 15 . Both supply of and demand for carrier 's carrier
FT, Sprint and the ROE and ROW entities will be inter ­ services are by nature international . Geographic
connected over the Phoenix global backbone network . In proximity between purchaser and supplier of switched
the global market for advanced telecommunications transit capacity is hardly relevant for switched transit
services to corporate users, the Phoenix venture will which carriers use either as a substitute for operating
therefore create competition for instance for BT and own international lines or to deal with peak traffic on
MCI the ROE 's existing entity Concert will cooperate venture with . In the DT European, FT and ATLAS Union, such cable - or lines satellite-based . Likewise, dedicated routing capacity transit across services third offer
to provide advanced telecommunications services to countries . Finally, using hubbing services is an alternative
corporate users at the cross-border regional level ; these to entering into an undetermined number of bilateral
services will have ' global connectivity ', i.e. allow for an agreements with individual carriers .
extension beyond the European Union if a customer so
requires .

2 . DT and FT s investment in Sprint

13 . Standardized low-level packet-switched data
communications services in each geographic market
mentioned in the previous paragraph are a part of the
Phoenix offerings portfolio . However, such services will
be provided at the national level only if so decided by
the regional Phoenix operating entity . Therefore, the
ROE entity will provide Europe-wide packet-switched
data communications services, that will initially be based
on the existing Transpac and Sprint networks . The
extent to which the ROE entity will provide such
services in national markets within the EEA will depend

. 16 . The acquisition by DT and FT of new equity
communications services in each geographic market equivalent to an approximate 20 % stake in Sprint aims
mentioned in the previous paragraph are a part of the at consolidating a strategic alliance to enter the global
Phoenix offerings portfolio . However, such services will telecommunications markets, which serves the parties
be provided at the national level only if so decided by best interest to improve and extend service in new
the regional Phoenix operating entity . Therefore, the market segments . Telecommunications markets are
ROE entity will provide Europe-wide packet-switched developing quickly and there is uncertainty about what
data communications services, that will initially be based they will look like in a few years ' time : the prospect of
on the existing Transpac and Sprint networks . The full liberalization is pushing TO 's to take positions, in
extent to which the ROE entity will provide such order to be in the best possible situation when full
services in national markets within the EEA will depend liberalization comes . As shown by the BT-MCI alliance,

investment in a US carrier offers one efficient way to
address multinational companies, i.e. the largest target
( 2 ) Commission decision of 27 July 1994 ( OJ No L 223, 27 . 8 . customer group for global value-added telecommuni ­

1994, p. 36 ). cations network services, notably in the United States .

1994, p. 36 ).

No C 337 / 16 lENl Official Journal of the European Communities 15 . 12 . 95

C. MARKET SHARES OF PHOENIX outsourcing services to [...]% O in France and to

[...]% ( 10 ) in Germany, compared with 31 % in France
and 33 % in Germany for the second-largest provider,
Concert 's Syncordia, in both these national markets .
The markets for advanced telecommunications services to

corporate users

The market for standardized low-level packet-switched data
17 . Global market . The parents estimate the global communications services
value-added telecommunications network services
market addressed by Phoenix ( exclusive of data
communications services ) to be worth approximately 20 . The global market for standardized low-level
ECU 4,8 billion ( 1993 ). Of this total, end-to-end services packet-switched data services was worth approximately
accounted for approximately ECU 37,6 million, VPN ECU 5,3 billion in 1993, while DT, FT and Sprint 's
services for approximately ECU 2,8 billion, VSAT aggregate sales were [. . .] (") or [...]% ( 12 ) worldwide .
services for approximately ECU 1,4 billion and The European market for data communications services
outsourcing services for approximately ECU 527 million . is discussed in the separate notice on the Atlas trans ­
In 1993, the aggregate turnover of DT, FT and Sprint in action, published in this issue of the Official Journal .
the different market segments amounted to Sprint 's turnover for standardized low-level packet ­
approximately ECU 3,8 million for end-to-end services, switched data services was [. . .] in 1993, bringing DT,
approximately ECU 576 million for VPN services and FT and Sprint 's aggregate shares of that market to
approximately ECU 6 million for outsourcing services, [. . .] % ( 13 ). As for national markets, Sprint achieved its
giving Phoenix a theoretical market share of 11,8% in highest turnover in France, Germany, Italy and the
the global market for advanced telecommunications United Kingdom . Neither DT nor FT have a significant
services to corporate users . market presence in the latter two Member States, where

18 . Cross-border regional market . Services in the
European Union ( exclusive of data communications
services ) accounted for approximately ECU 505 million
in 1993 . According to the notification the Phoenix
parents ' aggregate market shares in the European Union
in 1993 were [. . .] % ( 3 ) in the end-to-end services
market, [. . .] % ( 4 ) in the VPN services market

[...]% ( 5 ) in the outsourcing services market and

[...]% ( 6 ) in the VSAT market . However, market shares
for VSAT services are difficult to calculate given that
TOs mostly use VSAT terminals as back-up facilities for

other services or to extend the geographic scope of
services despite terrestrial infrastructure shortcomings .

19 . National markets . National markets for advanced
telecommunications services to corporate users within the
EEA are discussed in the notice on the Atlas venture,
published in this issue of the Official Journal . In this
regard, Sprint has a significant share of total outsourcing
turnover generated in Member States such as the
Netherlands [. . .] % ( 7 ) and the United Kingdom

[. . .] % O, where DT and FT 's outsourcing joint
venture, Eunetcom BV, has a lesser presence (5 % of
total turnover in both Member States ). As for France and
Germany, adding Sprint to DT and FT brings Phoenix 's
fictional aggregate share of total turnover generated by

( J ) Business secret ( less than 30 % ).
( 4 ) Business secret ( less than 30 % ).

20 . The global market for standardized low-level
packet-switched data services was worth approximately
ECU 5,3 billion in 1993, while DT, FT and Sprint 's
aggregate sales were [. . .] (") or [...]% ( 12 ) worldwide .
The European market for data communications services
is discussed in the separate notice on the Atlas trans ­
action, published in this issue of the Official Journal .
Sprint 's turnover for standardized low-level packet ­
switched data services was [. . .] in 1993, bringing DT,
FT and Sprint 's aggregate shares of that market to

[. . .] % ( 13 ). As for national markets, Sprint achieved its
highest turnover in France, Germany, Italy and the
United Kingdom . Neither DT nor FT have a significant
market presence in the latter two Member States, where
Sprint has [. . .] % ( 14 ) and [. . .] % ( 1S ) market share
respectively . In turn, Sprint 's turnover in France ( ECU

[. . .] (,6 )) and Germany ( ECU [. . .] ( 17 )) equals market
shares in these Member States of only [...]% and

[. . .] % respectively (").

( ) Business secret ( less than 25 % ).
(,3 ) Business secret ( less than 40 % ).
( 14 ) Business secret ( less than 5 % ).
( 15 ) Business secret ( less than 5 % ).
( 16 ) Business secret .
( 17 ) Business secret .

The market for traveller services

21 . Total calling card revenue in the European Union
was approximately ECU 120,5 million in 1994, most of
which generated by national dialling . In 1993, DT had
issued 200 000 cards ( all of which in Germany ),
equivalent to 2,1 % of the total card subscriber base in
the European Union ; FT had issued 1,5 million cards ( all
of which in France ), equivalent to 15,7% of the card
subscriber base in the European Union ; and Sprint had
issued 12 million cards worldwide, of which 500 000
( equivalent to a 5,2 % market share ) in the European
Union . The aggregate market shares of the parents
would therefore make Phoenix the largest calling-card
services provider in the European Union ( 23 % market
share ) in terms of subscriber numbers, ahead of AT&T
and BT with 21 and 17,8 % market share respectively .

( ) Business secret ( less than 45 % ).
( ) Business secret ( less than 40 % ).
(") Business secret .

( 5 ) Business secret ( less than 5 % ). ( 15 ) Business secret ( less than 5 % ).
(') Business secret ( less than 25 % ). ( 16 ) Business secret .
( 7 ) Business secret ( less than 10 % ). ( 17 ) Business secret .
(") Business secret ( less than 10 % ). (") Business secret ( less than 5 % respectively ).

15 . 12 . 95 EN Official Journal of the European Communities No C 337 / 17

In terms of calling card traffic within the European
Union, the aggregate market shares of FT ( 21 % ) and
DT (3 % ) are equal to BT 's market share of 24 % .

The market for carrier 's carrier services

22 . The market for global switched transit services is
estimated to be worth approximately ECU 301,1 million,
equivalent to 1 500 million minutes of international
traffic or approximately 3 % of the world 's international
telephony traffic . Of this total, approximately ECU
165,6 million are services provided by European carriers,
of which approximately ECU 30,1 million to other
European carriers . Within the global switched transit
market ( 1994 ), with 5-6 % annual growth, DT had a
turnover of ECU [. . .] ("), FT of ECU [. . .] ( 20 ) and
Sprint of ECU [. . .] ( 21 ). The aggregate market shares of
DT, FT and Sprint make Phoenix the third largest global
switched transit provider behind AT&T and BT ( 20,2 %
each ).

D. MAIN COMPETITORS OF THE PHOENIX ENTITIES

The market for carrier 's carrier services

25 . Major players in the market for carrier 's carrier
services and notably global switched transit services
competing in the EEA include AT&T, BT ( each holding
approximately one fifth of the market ), Cable &
Wireless, MCI and Teleglobe Canada . Along with the
increasing proliferation of new carriers that seek to be
independent of the incumbent TO for their international
traffic, new suppliers of such services, some with
substantial infrastructure resources, are emerging in the
market, e.g. Hermes Europe Railtel .

E. THE TRANSACTION

26 . The transaction notified to the Commission
comprises a set of agreements whose main features are
described below .

1 . Agreements as originally notified

1 . Agreements regarding the Phoenix joint venture

The market for value-added telecommunications network
services The parties have to date submitted one final
agreement : the Phoenix Joint Venture Agreement
( the ' JV Agreement ;'), that sets out the parties '
essential commitments and business objectives .

23 . The situation in these markets is discussed in the

Attached as annexes to the JV Agreement are

separate notice on the Atlas venture published in this detailed term sheets for all agreements described
issue of the Official Journal .

below, which will be submitted upon closing of the
Phoenix transaction . These term sheets detail the
agreed content of the following agreements :

The market for traveller services

24 . More than one third of calling cards in Europe
are issued by US operators . AT&T is estimated to have 2
million postpaid card customers in Europe, equivalent to
21 % of all cards issued there . These customers generate
59 % of calling card traffic initiated in Europe on the
US route . MCI is estimated to have 1 million postpaid
card customers in Europe ( 10,5 % ), which generate
27 % of calling card traffic initiated in Europe on the
US route . Executive Telecard International ( ETI )
markets calling cards in Europe through agreements with
local operators or credit card companies ; ETI 's market
position is similar to that of MCI .

(") Business secret ( market share less than 10 % ).
( 2C ) Business secret ( market share less than 15% ).
(") Business secret ( market share less than 5 % ).

( a ) the Transfer Agreements will provide for the
transfer by Sprint, FT, DT, and Atlas
( collectively referred to as the ' parents ') of
certain basic and related businesses to the

relevant ROE, ROW, and GBN entities .

( b ) The Intellectual Property and Trademark Licence

Agreements will concern the grant by the
parents and certain affiliates to the Phoenix
entities of non-exclusive, non-transferable
licences to use certain of the parents ' technical
information and trademarks .

( c ) The Services Agreements will specify the terms

and conditions of trading relationships among
Sprint, Atlas, and the ROE and ROW entities,
including the supply and support services
needed to provide Phoenix services worldwide .

No C 337 / 18 [ ENl Official Journal of the European Communities 15 . 12 . 95

2 . Agreements regarding FT and DTs investment in

Sprint

( a ) The Investment Agreement will provide for the

purchase by each of FT and DT of
approximately 10 % of the common stock of
Sprint .

( b ) The Standstill Agreement will bind FT and DT

for a period of 15 years not to acquire
additional shares in Sprint which would
increase their combined aggregate voting rights
to more than 20 % .

( c ) The Registration Rights Agreement is required

in order for each party to consummate the
transactions contemplated by the Investment
Agreement .

2 . Main Contractual Provisions

1 . Concerning the Phoenix Entities

( a ) Structure of the Phoenix venture

The JV Agreement provides for the creation of
the following operating entities : Phoenix Rest
of Europe ( ROE ), Phoenix Rest of the World
( ROW ) end Global Backbone Network
( GBN ). The ROE entity will conduct the
Phoenix business within the ' rest of Europe '
region ( i.e. outside of France and Germany ),
while the ROW entity will conduct the
Phoenix business within the ' rest of the world '
region ( i.e. outside Europe and the United
States ). The GBN entity will own and operate
a global transmission network over which
Phoenix services and other traffic will be

routed .

FT and DT will each be the exclusive

distributor of Phoenix services in France and
Germany respectively ; however, FT and DT
will meet unsolicited customer requests for
services regardless of the customer 's location .
Moreover, the French and German subsidiaries
of Atlas will provide FT and DT with ( i ) sales
support services regarding Phoenix products to
distributors in France and Germany ; and ( ii )
services within the scope of Phoenix other than
X.25 packet-switched data network services .

A new, wholly-owned subsidiary of Sprint ( the

' Sprint Subsidiary 5 ) and Atlas will each initially
own 50 % of the outstanding voting equity of
each of the parent entities of the ROW entity
and the GBN entity . The Sprint Subsidiary and
Atlas will initially own 33 >/3 and 66 2 /3 %,

respectively, of the voting equity of the parent
entity of the ROE entity .

A Global Venture Board will be established to
set global policies and monitor compliance of
the operating groups with their business plans .
Any initiative of the Global Venture Board will
generally require a unanimous vote .

Day-to-day operations will be the responsi ­
bility of the chief executive officers of the
operating entities, who are under the super ­
vision of the governing board of the relevant
parent entity of either the ROE, ROW, or
GBN entity . Most decisions of each governing
board will be adapted by simple majority vote
of the members present . Unanimous consent is
however required for a number of important
decisions including final approval of business
plans, certain changes in structure and capital ­
ization, and certain decisions on technology
and investments .

( b ) Purposes and activities of Phoenix entities

The business of the joint venture will initially
consist of the provision of ( i ) global inter ­
national data, voice, and video business
services for multinational companies and
business customers ; ( ii ) international services
for consumers, initially based on card services
for travellers, and ( iii ) carrier services
providing certain transport services for the
parents and other carriers . The Phoenix
entities may also offer telecommunications
equipment and invest in national operations .

To market these services the Phoenix joint
venture will be responsible for the planning

and management functions of operations, as
well as marketing and customer support,
including the following :

( i ) central coordination of product devel ­
opment and management to ensure
seamless global services ; the Phoenix
entities shall notably define functionality,
technical standards, and service level
requirements for Phoenix services ;

( ii ) implementation of a common global
network and information systems platform
rationalizing and integrating the currently

15 . 12 . 95 fENl Official Journal of the European Communities No C 337 / 19

separate international data, voice, and
overlay networks of the parents ; the GBN
will link overlay and backbone networks
in each operating area ( i.e. ROE and
ROW ) while proprietary interfaces will
allow provision of seamless services ;
within its first few years of operating,
Phoenix will begin to deploy the next
generation of Asynchronous Transfer
Mode ( ATM ) technology, comprising any
and all of transmission, switching,
signalling, network intelligence, and
service management elements ;

( iii ) integration and development of
information systems for coordinated
billing, customer support, and other back ­
office functions, supporting national
distributors ; and

( iv ) development of a sales presence in the

ROE and ROW territories either directly
or through distribution arrangements
using a common ' masterbrand ' ; in
particular, national service operations will
be established or consolidated in each
major country, and will be responsible for
distributing Phoenix services within that
country ; in addition, regional sales offices
will be established to provide technical

and sales support, including identification
of potential customers and assisting in
preparation of customer proposals .

( c ) Provisions concerning dealings with / by Phoenix

entities

Pursuant to the JV Agreement, transactions
among the Phoenix entities, on the one hand,
and FT, DT, and Atlas, on the other, will
generally be conducted on the most favourable
terms and conditions that are offered to third
parties . If products, services, or facilities
relevant to these transactions are not

commercially available, such transactions shall
be conducted in accordance with an arm 's
length pricing method, using full-cost reim ­
bursement or such other arm 's length pricing
method as may be agreed on by the parties .
The parents shall have the first right to offer to
supply certain products, services, and facilities
to the Phoenix entities . Notwithstanding, each
Phoenix entity may purchase from a third
party which, on otherwise comparable terms

and conditions, offers lower prices, either once
the parties have been given the opportunity to
match such terms and conditions or if a

customer so requires .

Each of the Phoenix entities and their parents
have the first right to offer to perform in their
respective territory any facilities or services
required by another party to the Phoenix
agreements . Such services may be obtained
from a third party at a lower price under
comparable terms and conditions, or where a
customer so requires . In accordance with this
principle, the ROE and ROW entities will be
required to purchase telecommunications
network transmission capacity from the GBN
entity to the extent available .

( d ) Non-compete provisions ; distribution

# Pursuant to the J 1 / Agreement as originally

notified, albeit subject to various exceptions,
no party or affiliate of a party may distribute
any international telecommunications services
which are either provided by the Phoenix
entities or substitutable for such services .
Likewise, no party or affiliate of a party may
invest in any entity that offers such services .
Moreover, no party or any of its affiliates may
offer national long-distance services in
competition with either a national operation of
Phoenix or a public telephone operator
affiliated with Phoenix ( e.g. a national
distributor of Phoenix ). Nor may any party or
any of its affiliates make investments in any
entity offering such competing national long
distance services or in any national operation
allied with a major competitor of Phoenix .

Outside the parents ' home countries exclusivity
will be granted to distributors on a case ­
by-case basis . Passive sales by one distributor
to customers in the respective sales territory of
any other distributor will be allowed in the
EEA .

( e ) Licences to be granted to Phoenix entities

Under the Intellectual Property Agreements,
each parent will grant each of the Phoenix

No C 337 / 20 ( EN ! Official Journal of the European Communities 15 . 12 . 95

entities non-exclusive, non-transferable licences
to use certain technical information of that
parent in the respective territories of such
entities to conduct the Phoenix business . Each
Phoenix entity shall have the right to
sub-license the rights granted to any other
Phoenix entity or any affiliated national
operation or local partner, to the extent such
sub-licence is necessary to conduct the Phoenix
business . Likewise, each Phoenix entity shall
on request also sub-license such rights to any
parent or affiliate of such parent, to the extent
such sub-licence is necessary to conduct the
Phoenix business .

Royalties shall be payable as customary in the
market and negotiated by the parties on an
arm's-length basis . Licence rights granted to a
party under the Intellectual Property
Agreements will continue in the event of either
termination of the Phoenix venture or transfer

of such party 's interest in the Phoenix venture .

Similarly, pursuant to the Trademark Licence
Agreement each parent grants each of the
Phoenix entities non-exclusive, non-trans ­
ferable rights to use certain trademarks owned
by or licensed to such parent in connection
with the marketing or sale of certain auth ­
orized products and services in the respective
territories of such entity .

2 . Concerning FT and DTs investment in Sprint

( a ) Restrictions on transfer of shares by FT or DT

rights to more than 20 % . Once this initial
' standstill ' period has expired, FT and DT may
acquire additional shares, but may not increase
their aggregate voting rights above 30 % nor
conduct certain activities intended at taking
control of Sprint .

( b ) Consent rights and board representation of FT

and DT

FT and DT have the right to elect directors to
the Sprint board in proportion to their share ­
holding, provided that each has the right to
elect at least one director . Neither FT or DT
may have access to confidential, competitive
information on Sprint 's activities in the EEA
through their representation on Sprint 's board .
Nor may these representatives provide Sprint
with confidential information that FT or DT
may have obtained from US competitors
through correspondent relationships .

As the sole holders of Sprint 's class A common
stock, FT and DT have been granted
substantial consensual rights with respect to
certain corporate actions of Sprint, which
nevertheless fall considerably short of control .
These actions include major equity issuances,
disapproval of investments in Sprint by major
competitors, participation rights in transactions
involving change of control, and other bilateral
corporate transactions . FT and DT have a
right of first offer with respect to long-distance
assets of Sprint for a fixed period of time .

F. CHANGES MADE AND UNDERTAKINGS GIVEN

FURTHER TO THE COMMISSION 'S INTERVENTION

and limitis on increases of their shareholding in
Sprint

and limitis on increases of their shareholding in 27 . Some features of the agreements as notified
Sprint appeared to be incompatible with the Community

competition rules . In the course of the notification
procedure the parties have amended certain clauses in
their agreements and given undertakings to the
Pursuant to the Investment Agreement, neither Commission .
FT or DT may dispose of its shares in Sprint
for five years after the closing date . Thereafter
restrictions apply to large transfers, which
would in most circumstances give Sprint the 1 . Contractual changes
rights of first refusal .

1 . Contractual changes

Pursuant to the Standstill Agreement, FT and
DT shall each have the right to acquire
additional Sprint shares to reach and maintain
a 10% shareholding, but shall not for 15 years
after the closing date acquire additional shares
that would increase their aggregate voting

28 . Non-appointment of Phoenix as an agent for inter ­
national half-circuits . Following an announcement made
in the Phoenix notification, which did not yet reflect the
parties commitments regarding Atlas further to the
Commission 's intervention, DT, FT, Atlas and Sprint
have deleted FT and DT 's ' international private lines ',
i.e. FT and DT 's international half-circuits, from the list
of products that Phoenix would distribute as agent .

# 15 . 12 . 95 riNi Official Journal of the European Communities No C 337 / 21

29 . Non-compete provisions . The parties have not yet
sought an exemption pursuant to Articles 85 ( 3 ) of the
EC Treaty and 53 ( 3 ) of the EEA Agreement for any
specific agreements regarding national long-distance
services . The non-compete clause in the original JV
Agreement has therefore been amended : the parties are
now obliged to refrain only from either ( i ) competing
with or ( ii ) investing in a competitor of entities providing
long-distance services provided such entities are
controlled by Phoenix .

with the Phoenix venture . To avoid that the Phoenix

entities or their distributors benefit from cross ­
subsidies stemming from the operation of both public
telecommunications infrastructure and reserved
services by either DT or FT, all entities formed
pursuant to the Phoenix venture will be established as
distinct entities separate from DT and FT .

The ROE and ROW entities will obtain their own
debt financing on their own credit, provided that
2 . Non-discrimination Sprint, FT and DT :

30 . Just as DT and FT shall be prohibited from
discriminating in favour of the joint venture, as described
in the separate notice on the Atlas transaction, the
Commission intends likewise to prohibit DT and FT
from discriminating in favour of the Phoenix entities .
The same is true for the specific elements covered by this
requirement ( 22 ).

( a ) may make capital contributions or commercially

reasonable loans to such entities as required to
enable the ROE and ROW entities to conduct the

Phoenix business ;

( b ) may pledge their venture interests in such entities
3 . Undertakings given by the parties

in connection with non-recourse financing for
such entities ; and

31 . Carrier 's carrier services . Neither Atlas, Phoenix,
DT, FT, Sprint or any affiliate of these entities shall
make a particular telecommunications operator 's ability
to use Phoenix international carrier services conditional
upon use or distribution by that telecommunications
operator of services provided by Atlas, Phoenix, FT, DT
or Sprint . Neither shall Atlas, Phoenix, DT, FT, Sprint
or any affiliate of these entities make its commercial
dealings ( i.e. terms, conditions, price, discounts ) with any
telecommunications operator conditional upon use or
distribution by that telecommunication 's operator of
services provided by Atlas, Phoenix, FT, DT or Sprint .

32 . DT, FT and Sprint have also given further under ­
takings that mirror the undertakings given in connection
with the Atlas notification ; reference is therefore made
to the separate notice on the Atlas transaction published
in this issue of the Official Journal .

1 . C ross-subsidization

As in the context of the Atlas transaction, DT and FT
shall not engage in cross-subsidization within the
meaning of the Commission 's competition guidelines
for the telecommunications sector (") in connection

(") See notice pursuant to Article 19 ( 3 ) of Council Regulation

No 17 concerning Case No IV / 33.361 — Infonet ( OJ
No C 7, 11 . 1 . 1992, p. 3, at paragraph 9 ).
(") Guidelines on the application of EEC Competition Rules in

the Telecommunications Sector ( OJ No C 233, 6 . 9 . 1991,
p. 2, paragraph 102 et seq .).

( c ) may guarantee any indebtedness of such entities,

provided that Sprint, FT and DT may only make
payments pursuant to any such guarantee
following a default by such entities in respect of
such indebtedness .

The ROE and ROW entities shall not allocate
directly or indirectly any part of their operating
expenses, costs, depreciation, or other expenses of
their businesses to any parts of DT of FTs business
units ( including without limitation the proportionate
costs based on work actually performed that are
attributable to shared employees or sales or marketing
of Phoenix products and services by DT or FT
employees ). However, nothing shall prevent such
Phoenix entities from billing DT or FT for products
and services provided to DT or FT by such entities on
the basis of the same prices charged to third parties
( in the case of products or services sold to third
parties in commercial quantities ) or full cost reim ­
bursement or other aim 's length pricing method ( in
the case of products and services not sold to third
parties in commercial quantities ).

The ROE and ROW entities shall keep separate

accounting records that identify payments or transfers
to or from DT and FT . The ROE and ROW entities
shall not receive any material subsidy ( including

No C 337 / 22 EN Official Journal of the European Communities 15 . 12 . 95

forgiveness of debt ) directly or indirectly from DT or 35 . While the European Commission was assessing the
FT, or any investment or payment from DT or FT Phoenix notification under Community law, the US
that is not recorded in the books of such entities as an Department of Justice have concluded a procedure under
investment in debt or equity . US anti-trust law by entering a consent decree . This

consent decree spells out undertakings by the parties that
2 . Recording and reporting largely resemble those described in this notice .

The same undertakings apply as described in the
notice on the Atlas transaction published in this issue THE COMMISSION'S INTENTIONS
of the Official Journal .

33 . In so far as related to existing obligations under
national or Community law, the above is intended to
ensure the parties ' firm commitment to comply with the
applicable legal framework .

G. THE REGULATORY SITUATION

34 . The regulatory situation in France and Germany is
described in the notice on the Atlas transaction . As for
the United States, pursuant to the 1934 Communications
Act, Sprint shall publish tariff schedules and contracts
describing its network arrangements and services .
Furthermore, the 1934 Communications Act, enforced
by the Federal Communications Commission ( FCC ),
prohibits Sprint from providing services that unjustly or
unreasonably discriminate against Sprint 's competitors or
foreign correspondents, which may lodge a formal
complaint before the FCC if Sprint does not comply with
these obligations .

36 . On the basis of the foregoing, the Commission
intends to take a favourable position on the notified
transaction under the competition rules of the EC Treaty
and under Article 53 of the EEA Agreement and to grant
Phoenix an individual exemption pursuant to Article 85
( 3 ) of the EC Treaty and Article 53 ( 3 ) of the EEA
Agreement . Before doing so, the Commission invites
interested third parties to send their observations within
six weeks from the publication of this notice to the
following address, quoting the reference TV / 35.617 —
Phoenix ' :

European Commission,

Directorate-General for Competition ( DG IV ),
Directorate for Information, Communication
and Multimedia,
Rue de la Loi / Wetstraat 200,
B-1Q49 Brussels .
Fax : ( 32 2 ) 296 98 19 .