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No C 337 / 2 fEN Official Journal of the European Communities 15 . 12 . 95

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 IV / 35.337 — Atlas

( 95 / C 337 / 02 )

( Text with EEA relevance )

INTRODUCTION wide turnover in 1994 was ECU 31,8 billion, a 4,3 %
increase over 1993, for DT and ECU 21,7 billion, a

1,8 % increase over 1993, for the FT group .

1 . Atlas was notified to the Commission on 16

December 1994 . This transaction brings about a joint
venture owned 50 % by France Telecom ( FT ) and 50 %
by Deutsche Telekom ( DT ). Atlas is also the instrument
of DT and FT 's participation in a second transaction,
named Phoenix, with Sprint Corporation ( 2 ). In the
course of the procedure before the Commission, FT and
DT agreed to modify both the Atlas and the Phoenix
agreements . The latter, notified on 29 June 1995, are
described in a separate notice pursuant to Article 19 ( 3 )
of Regulation No 17, published in this edition of the

Official Journal of the European Communities .

2 . The Atlas venture will be structured at two levels . A

holding company established in Brussels, Atlas SA, will
be incorporated as a societe anonyme under the laws of
Belgium . Atlas SA will have three operating subsidiaries,
namely one in France ( Atlas France ), one in Germany
( Atlas Germany ), and one for the rest of Europe . Atlas
France and Atlas Germany will initially provide technical
and sales support to FT and DT, i.e. the French and
German distributors of Atlas and Phoenix products .
After full liberalization of the telecommunications infra ­

structure and services markets in France and Germany,
scheduled to occur by 1 January 1998, DT 's subsidiary
for the provision of standardized low-level packet ­
switched X.25 data communications, Datex-P, will be
merged with Atlas Germany while FT 's subsidiary for the
provision of standardized low-level packet-switched
X.25 data communications, Transpac France, will be
merged with Atlas France .

A. THE PARTIES

B. THE RELEVANT MARKET

1 . Product markets

4 . Atlas will address the markets for the provision of
value-added telecommunications services to corporate
users both Europe-wide and nationally . Atlas will target
two separate product markets for value-added services,
namely :

5 . The market for advanced telecommunications services to

corporate users

This market comprises mostly customized combinations

of a range of existing telecommunications services,
mainly data communications and liberalized voice
services including voice communication between
members of a closed group of users ( virtual private
network ( VPN ) services ), high-speed data services and
outsourced telecommunications solutions specially
designed for individual customer requirements . The
market for advanced telecommunications services to

corporate users, enhanced by features such as tailored
capacity allocation, billing, 24h / 24h technical service,
etc ., is currently changing and evolving rapidly . Whether
each of these services constitutes a separate product
market can be left open for the purpose of this case, as
Atlas and its competitors usually offer customized
packages of such services in combination with individual
enhanced features .

3 . Deutsche Telekom AG ( DT ) and France Telecom .
( FT ) are the public TO in Germany and France . Both
supply telephone exchange lines to homes and busi ­
nesses ; local, trunk and international communications to
and from their respective home country . World ­ These services are provided over high-speed large ­
capacity leased lines linking sophisticated equipment on
customer premises to the service provider 's nodes . Alter ­
(') OJ No 13, 21 . 2 . 1962, p . 204 / 62 . natively, other means of transmission, e.g. satellite or
( 2 ) Notification announced in OJ No C 184, 18 . 7 . 1995, p. 11 . mobile radio capacity, can be used to ensure the

15 . 12 . 95 ΓΕΝΙ Official Journal of the European Communities No C 337 / 3

geographic coverage demanded from time to time . Such
services employ advanced state-of-the-art standards, data
compression techniques, equipment and software . In this
market, Atlas is expected to offer a portfolio of services
including the following :

— data services : high speed packet-switched and Frame

Relay services ; pre-provisioned, managed and circuit ­
switched bandwidth,

— value-added application services : value-added
messaging and video-conferencing services,

— voice VPN services,

— intelligent network services,

— integrated very small aperture satellite ( VSAT )
network services, and

— outsourcing : customers are offered to transfer
responsibility and ownership of their networks to
Atlas . In this connection, Atlas may integrate into its
own offerings third-party products already owned by
customers who wish to keep such offerings, as the
case may be .

6 . Due to the high cost of building and operating the
networks needed to provide advanced corporate services,
such services can be commercially viable only if provided
to large businesses and other large telecommunications
users who generate continued high traffic volumes ( 3 ).
Customers for advanced services targeted by Atlas are
multinational corporations, extended enterprises, and
other intensive users of telecommunications and notably
the largest among these customers . Many of these
potential customers have huge telecommunication needs

and have often acquired expertise in managing own
internal networks ; they are not likely to switch to service
providers such as Atlas unless doing this proves to be
cost-effective . Finally, given their knowledge of the
market these customers are in a position to request offers
from different competitors .

7 . The market for standardized low-level packet-switched

data communications services

Atlas will also be active on a separate market for packet ­

switched data communications services . The Commission

considers data communications services a distinct tele ­

communications product market, without prejudice to
the existence of narrower markets ( 4 ). One narrower

( 3 ) See Commission decision in Case No IV / 34.857 ( BT-MCI )

of 27 July 1994 ( OJ No L 223, 27 . 8 . 1994 ).
(') Commission 's Guidelines on the application of EC
competition rules in the telecommunications sector ( OJ No
C 233, 6 . 9 . 1991, p. 2, paragraph 27 ).

market is that for packet - and circuit-switched
services ( 5 ). Packet switching is a means to improve
network capacity utilization and consists of splitting data
sequences into ' packets ', feeding these and other
' packets ' into the network optimizing utilization of
available capacity, switching the ' packets ' to the desired
destination and rearranging the ' packets ' to obtain the
data sequences sent . The most common standard used
for the provision of packet-switched data services is the
' X.25 ' standard .

Packet-switched data communications services constitute

a distinct product market because they are provided over
basic terrestrial network infrastructure and based on

more mature technology . These services are provided to
different customer segments within the same product
market, namely :

1 . On the one hand, customers who generate mostly

erratic and geographically widespread traffic . These
features are due either to the specific type of use ( e.g.
banks operating cash machines nationwide, networks
of points-of-sale in shops ) or to the size of such
customers, i.e. small and medium-sized enterprises
( SMEs ). Such services ; are billed according to
published tariffs that are proportional to the actual
time of use of the network .

All incumbent Member State TOs including DT and
FT operate dense public data networks with
nationwide coverage providing packet-switched data
communications services to this customer segment . In
each Member State there is only one public data
network built by the respective incumbent TO under
a public service obligation before market liberal ­
ization .

2 . On the other hand, larger corporate customers and

other extended users generate more substantial and
regular traffic . The requirements of these users justify
that either third-party service providers or the
potential customer itself assume the high cost of
creating customized leased lines circuits to meet indi ­
vidual service demand . Packet-switched data

communications services to such users are billed

according to negotiated rates that take account of the
individual demand features of a particular customer .

( 5 ) As defined in Article 1 ( 1 ), 9th indent of Commission
Directive 90 / 388 / EEC of 28 June 1990 on competition in
the markets for telecommunications services ( OJ No L 192,
24 . 7 . 1990, p. 10 ), ( the ' Services Directive ').

No C 337 / 4 fEN ] Official Journal of the European Communities 15 . 12 . 95

8 . Virtually all companies active in each individual
Member State of the European Union are potential if
not actual customers for national standardized low-level
packet-switched data communications services . These
services are also required by SMEs, albeit in smaller
volumes and possibly less regularly than by larger users .

Seldom will such volumes justify that service providers
invest in leased lines with the specific purpose of
reaching these SMEs, which are therefore in a weak
negotiating position and hardly capable to date of
switching from the current provider, typically the
incumbent TO, to a competitor .

9 . Standardized low-level packet-switched data
communications may also be offered as one service
combined with advanced corporate service offerings .
However, even as part of such combined offerings
packet-switched data communications services are
provided over standard terrestrial infrastructure . At the

national level, choice from a wider range of offerings
than merely standardized low-level packet-switched data
communications services may also be available to larger
customers that are not using the TO 's public data
networks but are served over customized leased-line
circuits . However, most existing customers for stand ­
ardized low-level packet-switched data communications
currently generate annual turnover of far below ECU

10 000 each and are not therefore potential users of
advanced corporate network services . Therefore, packet ­
switched data communications offered by Atlas
constitute a product market separate from the advanced
network services market equally targeted by Atlas .

2 . Geographic markets

cations . The requirements of such users, that extend to
all products or corporate services provided by Atlas,
were discussed in detail in the BT-MCI decision ( 6 ).
Essentially, customers demand a customized package of
sophisticated telecommunications and information
services offered by one single provider . This provider is
expected to take full responsibility for all services
contained in the package from ' end to end '. Accordingly,
DT and FT intend to offer such customers through Atlas
what existing technology allows to offer from time to
time within the applicable regulatory framework . In this
regard, the parties have indicated that Atlas will
eventually extend to international voice traffic and other
basic services, regulation permitting .

12 . Due to the cost structure of advanced corporate
services, notably the cost of leasing the required infra ­
structure, prices of such services are related to
geographic coverage, as is the cost of additional features
( e.g. one-stop-billing, help-desk and technical assistance
around the clock, customized billing ). There is indication
that increasing availability of trans - European networks
will ultimately blur the distinction between national and

cross-border or ultimately Europe-wide advanced
corporate services . However, certain national sophis ­
ticated value-added services ( e.g. national voice YPN
services as well as data communications services based on

Asynchronous Transfer Mode ( ATM ) or equivalent
switching technology ) currently available from DT and
FT in Germany and France respectively will not be inte ­
grated into the Atlas offerings . This circumstance illus ­
trates that a distinction between national and cross ­

border advanced network services remains valid to date .

The markets for advanced telecommunications services to
corporate users The markets for standardized low-level packet-switched
data communications services

10 . Given that price differences are quite substantial,
demand for these services exists in at least three distinct
geographic markets, namely at a global, a cross-border 13 . Price differences may be less acute than for
regional and a national level . Atlas will provide advanced advanced corporate services . However, a national, cross ­
telecommunications services to corporate users border regional and global geographic level can be
Europe-wide and nationally . Through Phoenix, distinguished for standardized low-level packet-switched
advanced telecommunications services offered by Atlas data communications services . In terms of traffic
will also have global ' connectivity ', i.e. the technical volumes, supply and demand of standardized low-level
option to extend a given service offering beyond Europe packet-switched data communications services are mostly
by linking a customer 's premises worldwide over the national . For instance, in Germany DT^s existing
Phoenix ' Global Backbone Network '. Datex-P packet-switched data communications services

division hardly ever provides such services across the
border while FTs German subsidiary Info AG, in spite
of appertaining to FT 's seamless cross-border Transpac
11 . Given the considerable costs involved, advanced
services are today mainly demanded by large multi ­
national corporations, extended enterprises, as well as
major national and other intensive users of telecommuni ­ ( 6 ) See footnote 3 above .

15 . 12 . 95 | EN Official Journal of the European Communities No C 337 / 5

network, only provides one fifth of its packet-switched
data communications services across the border . This

assessment was confirmed by interested third parties who
submitted observations further to the Commission 's

notice on the Atlas notification ( 7 ).

14 . At a global and Europe-wide level, low-level data
services and advanced network services may be partly
converging to the extent that large customers of the
latter do not require separate provision of standardized
low-level packet-switched data communications services
once such services are available as part of service combi ­
nations offered over advanced networks . Accordingly,
large European telecommunications users demand
services with global ' connectivity ', i.e. that may be
extended beyond Europe if so required . DT and FT have
moved to meet this demand in entering the Phoenix
agreements with Sprint . Along with increased availability
of advanced cross-border network infrastructure, the
market is generally expected to overcome distinctions
along national borders in the medium term . However,
separate national geographic markets subsist to date for
standardized low-level packet-switched data communi ­
cations services and advanced network services

respectively .

C. MARKET SHARES OF ATLAS

The markets for advanced corporate telecommunications
service

15 . The parties estimate the European corporate tele ­
communications services markets ( exclusive of data
communications services ) to be worth approximately
ECU 505 million ( 1993 figures ). Of this total,
end-to-end services accounted for approximately ECU

15,1 million, VPN services for approximately ECU 220,6
million, VSAT services for approximately ECU 173,2
million and outsourcing services for approximately ECU
96,4 million . According to the notification DT and FT 's
aggregate market shares ( 1993 figures ) in the European
Union were 25 % in the end-to-end services market,
27 % in the VPN services market and 2,3 % in the
outsourcing services market . Market shares for VSAT
services are difficult to calculate given that TOs mostly
use VSAT terminals either as back-up facilities for other
services or to extend the geographic scope of services
despite terrestrial infrastructure shortcomings ; however
DT and FT taken together operated 10 907 VSAT
terminals by June 1994, equivalent to 29 % of the total
installed base of interactive, data one-way or business
television VSAT terminals in the European Economic

Area .

As to different segments of the advanced corporate
services market at the national level, DT and FT 's
aggregate market shares in France and Germany
respectively are 93 % in the French VPN market ( where
DT has no presence ) against 0 % in the German VPN
market, and 60 % in the French market for end-to-end
services against 35 % in the equivalent German market .
DT and FT 's outsourcing joint venture, Eunetcom BV,
achieved 36 % of total outsourcing turnover generated
in France and 29 % of total outsourcing turnover
generated in Germany . As for VSAT services, DT has
installed approximately 25 % of all VSAT terminals in
Germany ; this Member State accounts for 18 % of the
total installed base of such terminals in the EEA .

The market for standardized low-level packet-switched data
communications services

16 . DT and FT estimate the European market for
data communications services to be worth approximately
ECU 2,8 billion ( 1993 figures ). According to the notifi ­
cation DT and FT 's aggregate shares ( 1993 figures ) of
this market were 35 % . Among national markets, Atlas
will have a particularly strong position in France and

Germany . DT and FT 's aggregate market share for all
data communications services is 79 % in Germany and
77 % in France, of which approximately half accounts
for services provided by DT 's Datex-P division and FT 's
Transpac France subsidiary, both of which remain
outside the scope of Atlas until the French and German
telecommunications infrastructure and services markets

are fully liberalized as scheduled for 1 January 1998 .

D. MAIN COMPETITORS OF ATLAS

The markets for advanced corporate telecommunications
services

services or to extend the geographic scope of services 17 . Since the Commission 's BT-MCI decision many
despite terrestrial infrastructure shortcomings ; however players, acting alone or jointly with partners, have
DT and FT taken together operated 10 907 VSAT entered or are entering the market for international
terminals by June 1994, equivalent to 29 % of the total value-added services . Among the most important of these
installed base of interactive, data one-way or business players, albeit with disparate geographic scope and target
television VSAT terminals in the European Economic customers, are : AT&T WorldPartners, Concert,

Area .

Unisource IBM-Stet, or International Uniworld . Some Private of the Satellite above are Partners mere,

projects of strategic alliances between TOs, others are
awaiting regulatory approval . However, all of the above
( 7 ) Notification of a joint venture ( Case No IV / 35.337 — share the aim to position the respective partners in view
Atlas ) ( OJ No C 377, 31 . 12 . 1994, p. 9 ). of the full liberalization to come .

No C 337 / 6 EN Official Journal of the European Communities 15 . 12 . 95

The market for standardized low-level packet-switched data
communications services

18 . The market for standardized low-level packet ­
switched X.25 data communications services features a

substantially larger number of players than that for
customized offerings comprising advanced corporate
services . Among the global players in this market are the
alliances mentioned at paragraph 17 above competing
with providers such as EDS, FNA, Infonet, SITA or
SWIFT and operating subsidiaries of large global
companies such as AT&T Istel, Cable & Wireless
Business Networks, DEC 's Easynet, or GEIS .

In addition, a large number of smaller players compete at
a cross-border regional or national level in the EEA . For
instance, FY 's indirect German subsidiary Info AG, that
provides most of its data communications services within
Germany, is DT 's second-largest competitor in the
German national market for standardized low-level
packet-switched data communications services . None of
these smaller players can compare with large alliances in
terms of reach, access to transmission capacity and
financial backing .

( e ) The Agency Agreements under which each parent

appoints Atlas SA non-exclusive worldwide agent
for the sale of DT and FFs international leased

lines ( half-circuits ) with the territorial exception
of Germany as regards DTs half-circuits .

2 . Contractual provisions

20 . In particular, the above agreements provide for
the following :

1 . Structure of the Atlas venture

Atlas SA will be created as a joint venture between FT
and DT, each owning half the share capital . The
management structure of Atlas SA will be as follows :

( a ) Shareholders ' meeting : Prior approval of the share ­

. holders ' meeting is necessary for matters such as

the amendment of the articles of association,
modification of capital, issuance of shares,
mergers, sale of all or a substantial part of the
E. THE TRANSACTION assets, and liquidation .

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

1 . Agreements as originally notified

( a ) The Atlas Joint Venture Agreement ( JV
Agreement ) is the main agreement providing for
the establishment of the Atlas joint venture .

( b ) The Intellectual and Industrial Property Transfer

and Licence Agreements will be concluded by each
of FT and DT with Atlas SA . Under these

agreements FT and DT make available to Atlas
SA the intellectual property rights ( IPRs ) needed
to operate the Atlas business .

( c ) The Services Agreements will be framework
agreements setting forth the basic terms and
conditions with respect to the supply by DT and
FT of certain services to Atlas SA and the supply
by Atlas SA of certain services to FT and DT .

( d ) The Distribution Agreements : two substantially
similar distribution agreements with FT ' and DT
respectively will lay out, for the home countries
( France and Germany respectively ), the marketing
and sale of Atlas products .

( b ) Strategic Board : It is envisaged that the Strategic

Board of Atlas SA will have two co-chairmen and

eight members, one half appointed by each
parent, who may be freely removed and shall
meet at least twice a year . The Strategic Board
has a quorum of a majority of its members,
including at least two members appointed by each
party ; the co-chairmen do not have a tie-breaking
vote . Prior approval by the Strategic Board is
required for matters such as the entry into a joint
venture or other strategic alliance with a third
party, any significant modification of the scope of
Atlas 's business and such matters as may from
time to time be submitted to it by a vote of one
half of the members of the Board of Directors .

The Strategic Board shall also review all strategic
plans of Atlas SA .

( c ) The Board of Directors : It is envisaged that Atlas

SA 's Board of Directors will have nine members,
four elected by each of DT and FT and one by
Sprint . Prior approval by the Board of Directors is
required for a number of important decisions such
as the approval of business plans and annual
budgets and changes in the scope of Atlas, the
conclusion of important contracts, etc . Decisions
on changes in the Atlas business, management
appointments, and the approval of the business
plan, the annual operating plan, and the budget
require that at least two directors nominated by

# is . i2 . 95 ran Official Journal of the European Communities No C 337 / 7

each party vote with the majority . Matters on
which the Board of Directors fails to reach
agreement shall be brought before the Strategic
Board .

( d ) Chief Executive Officers ( CEOs ): It is envisaged

that Atlas SA will have two CEOs, one nominated
by FT among its representatives in the Board of
Directors, the other by DT among its represen ­
tatives in the Board of Directors . The CEOs shall

be jointly responsible for day-to-day operations
and the management of the business and affairs of
Atlas . Approval of both co-CEOs is required for

all important decisions including the hiring or
dismissal of key employees .

The parties will contribute to Atlas their existing
European assets outside France and Germany ( as well
as some assets in France and Germany ) used for the
provision of services coming within the scope of Atlas .

2 . Purpose and activities of Atlas

The Atlas venture is to provide seamless national and
international end-to-end services to corporate
customers ( i.e. to multinational companies ( MNCs )
and SMEs alike ). The portfolio of Atlas services
comprises data network services, international
end-to-end services ( managed links ), voice VPN
services, customer-defined networks, outsourcing and
VSAT services . These services are fully liberalized in
the European Union and are widely liberalized
worldwide . Atlas will have the responsibility for the
services portfolio mentioned above outside of France
and Germany .

In France and Germany, Atlas will be providing sales
support to FT and DT 's sales forces as regards all
services mentioned in the Atlas portfolio, with the
exception of public X.25 packet  - switched network
services within France and Germany, which will be
provided by FTs Transpac France subsidiary and
DT 's Datex-P subsidiary respectively until the tele ­
communications infrastructure and services markets

are fully liberalized in France and Germany, as
scheduled for 1 January 1998 .

Each acting as an exclusive distributor, DT will sell
Atlas services in Germany, while FT will sell Atlas
services in France . Atlas products will be sold in
France and Germany under the common globally
used Atlas / Phoenix brands . Passive sales of Atlas

services by DT in France, by FT in Germany and by
any Atlas operating entity in both Member States will
be allowed . Outside France and Germany, Atlas
products will be sold by the Atlas operating entity for
the rest of Europe .

It is planned that there will be a balancing payment by
DT at each closing to equalize the respective
contribution values of the two parties . It is further
envisaged that certain adjustment payments will be
made on the respective net worth of the entities
concerned at the time of contribution to Atlas . A

separate adjustment payment may be made between
FT and DT if the actual performance of the FT
contributed businesses in France or the DT

contributed businesses in Germany falls significantly
short of projections in 1995 ( and possibly 1996 ).

3 . Provisions concerning dealings with / by Atlas

Mutual service provision between Atlas and FT / DT
will be the object of two Services Agreements
pursuant to which dealings between FT / DT and Atlas
shall be transparent, non-discriminatory and at arm 's
length .

As for services generally offered by DT or FT, the
prices and other terms which DT or FT generally
apply from time to time to their customers shall
equally apply for Atlas . As for services not generally
offered by FT or DT, market prices and terms shall
apply and be negotiated between the Parties in good
faith at arm 's length . Consequently, Atlas will
purchase such services from DT or FT at the same
prices and conditions that any third party generally
offering such services would apply under the same
circumstances . If information on relevant market

prices is not available, the prices applicable for Atlas
shall be determined on the basis of a calculation

model that is used, within FT, to make offers to
customers with special requests and, within DT, to
calculate intra-group transfer prices . Prices resulting
from such calculation shall cover, for the relevant
period, all costs as well as a reasonable profit margin .

4 . Non-compete provisions

Pursuant to Article XIII of the Atlas JV Agreement,
FT and DT will not engage anywhere in the
production of services that are substantially the same
or compete directly with the Atlas services, and will
not engage outside of France and Germany in the
marketing, sale or distribution of services that are
substantially the same or compete directly with the
Atlas services . Furthermore, FT will not market or
distribute Atlas services in Germany and DT will not
market and distribute Atlas services in France ; passive
sales are however permitted by FT outside of France,
by DT outside of Germany and by Atlas in both
France and Germany .

No C 337 / 8 fENl Official Journal of the European Communities 15 . 12 . 95

5 . Provisions relating to intellectual and industrial property

FT and DT will each conclude an Intellectual and
Industrial Property Transfer and Licence Agreement
with Atlas SA under which the parties make available
to Atlas SA the intellectual property rights (' IPRs ')
which are needed to operate the Atlas business in

accordance with the following principles :

( a ) IPRs owned by, or licensed to, the parties that are

used exclusively for the Atlas business shall be
transferred to Atlas SA ;

( b ) IPRs owned by, or licensed to, the parties that are

used predominantly for the Atlas business shall
also be transferred to Atlas SA, and a sub-licence
shall be granted to the parties ( Grant Back
Licence sub-licence ); and

( c ) IPRs owned by, or licensed to, the parties that are

used predominantly for the parties ' business are
( sub-)licensed to Atlas SA .

F. CHANGES MADE AND UNDERTAKINGS GIVEN

FURTHER TO THE COMMISSION 'S INTERVENTION

21 . Certain features of the Atlas transaction as

notified appeared to be incompatible with Community
competition rules . Consequently, the Commission by
letter of 23 May 1995 informed the parties of its
concerns . In the course of the notification procedure the
parties have amended the original agreements and given
undertakings to the Commission .

1 . Contractual changes

structure and services markets are fully liberalized in
France and Germany, as is scheduled to occur by
1 January 1998 . Until then, it is envisaged that :

1 . Transpac SA will be split into Transpac France and

Transpac Europe ;

2 . Transpac Europe will be contributed to Atlas ;

3 . Transpac France will be a wholly owned subsidiary of

FT ;

4 . DTs Datex-P services division will be incorporated as

a separate company under German law and become a
wholly owned subsidiary of DT ;

5 . DT and FT ' s outsourcing joint venture, Eunetcom

BV, will be fully contributed to Atlas SA ; and

6 . Atlas SA will create a subsidiary in France and
Germany ( Atlas France and Atlas Germany
respectively ) to provide the following services :

( i ) sales support regarding Atlas products to
distributors in France and Germany ; and

( ii ) services within the scope of Atlas other than X.25

packet-switched data network services including :

— VSAT services,

— international end-to-end services,

— voice VPN services,

— customer-defined solutions ( excluding
national X.25 data communications services in
22 . Non-appointment of Atlas SA as an agent for inter ­
national half-circuits . Further to the Commission 's letter France and Germany ), and
of 23 May 1995, DT and FT abolished the Agency
Agreements and amended the original Service — outsourcing services .
Agreements to take account of the non-appointment of
Atlas SA as a non-exclusive agent for DT and FT 's half ­
circuits . Provided the telecommunications infrastructure and

— outsourcing services .

23 . Non-integration of French and German public data
networks before full liberalization of the telecommuni ­

cations infrastructure and services markets . Atlas SA shall
not acquire legal ownership or control within the
meaning of Article 3 of Council Regulation 4064 / 89 ( s )
of the French and German public X.25 packet-switched
data networks, Transpac France and Datex-P
respectively, before the telecommunications infra ­

Provided the telecommunications infrastructure and
services markets are fully liberalized in France and
Germany on 1 January 1998, Transpac France and
Datex-P will be contributed to Atlas on that date in such
a way that Atlas France and Atlas Germany will be
merged with Transpac France and Datex-P respectively .

24 . Technical cooperation . Ahead of full liberalization
of the telecommunications infrastructure and services
markets in France and Germany, scheduled to occur by

1 January 1998, DT and IT 1 will cooperate in the devel ­
opment of common technical network elements . This
(') OJ No L 395, 30 . 12 . 1989, p . 1 . cooperation will comprise only the following areas :

15 . 12 . 95 EN Official Journal of the European Communities No C 337 / 9

1 . FT and DT will cooperate in the development of

common products and common technical network
elements ( i.e. such products and elements that share
the same features, yet separately built and owned );
such cooperation will extend to the French and
German public X.25 packet-switched data communi ­
cations networks . Only the following functions will be
managed by Atlas SA for Transpac France and
Datex-P respectively :

( a ) product management and development, provided

that product branding and pricing as well as
product implementation in the network will be
managed by Transpac France and Datex-P
respectively ;

( b ) certain network planning functions ; and

( c ) information systems, provided that central
information system functions ( e.g. billing
information and statistics ) will be operated by
Transpac France and Datex-P respectively .

The above areas of cooperation shall in no case be
tantamount to a de facto integration of the French and
German public switched data networks, which will be
controlled by two separate network management
centres ; and

2 . Atlas may subcontract certain operational functions to

Transpac France and Datex-P respectively .

25 . Non-integration of assets of FT 's indirect German
subsidiary . The assets of FT 's German corporate telecom ­
munications services provider Info AG shall not be inte ­
grated into Atlas save as indicated at paragraph 27
below . Moreover, FT shall divest Info AG .

2 . Non-discrimination

26 . In order to provide the services described under
paragraph 5 above, Atlas or any other service provider is
dependent on the public switched telecommunications
network ( PSTN ) and reserved services ( 9 ). In France and
Germany, only FT and DT provide both access to the
PSTN and reserved services . Given that FT and DT are

indirect shareholders of Atlas it is essential for the safe ­

guarding of fair competition between Atlas and other
existing or future telecommunications services providers
to eliminate the risk that the former are granted more
favourable treatment regarding access and use of the
French and German PSTN and reserved services .

(') Reserved services are services which are provided pursuant

to special or exclusive rights granted by the EU Member
States to their respective TOs in compliance with EC law .

The Commission set out in its notice on the Infonet joint
venture ( 10 ) how prohibition to discriminate must be
understood in detail . Accordingly, to ensure the absence
of discrimination, the Commission intends to decide that
DT, FT and Atlas shall comply with the following :

1 . Terms and conditions : The terms and conditions

applied by DT and FT to Atlas for access to the
PSTN and for the provision of reserved services ( e.g.
provision of leased lines ) in connection with the
services described under paragraph 5 above shall be
similar to the terms and conditions applied to other
providers of similar services . This requirement covers
availability price, quality of service, usage conditions,
delays for installation of requested facilities, and
repair and maintenance services among other services .

2 . Scope of services available . Atlas shall not be granted

terms and conditions, or be exempt from any usage
restrictions regarding the PSTN and reserved services,
which would enable it to offer services which

competing providers are prevented from offering .

3 . Technical information : DT and FT shall not
discriminate between Atlas and any other service
provider competing with Atlas in connection with
either a decision to substantially modify technical
interfaces for the access to reserved services or the

disclosure of any other technical information relating
to the operation of the PSTN .

4 . Commercial information . DT and FT shall not
discriminate between Atlas and other providers of
services as described under paragraph 5 above as
regards the disclosure of certain commercial
information . This means that DT and FT shall not
provide Atlas with systemized and organized
customer information derived exclusively from the
operation of the PSTN or the provision of reserved
services if such information would confer a substantial

competitive advantage and is not readily and equally
available elsewhere by service providers competing
with Atlas .

3 . Undertakings given by the parties

27 . Divestiture of Info AG . FT shall divest of its
interest in Info AG . To the extent separable from the

( ) 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 ).

No C 337 / 10 EN Official Journal of the European Communities 15 . 12 . 95

product divisions of Info AG that shall be divested, services . Atlas will be allowed to access the Transpac
advanced network services for multinational clients France and Datex-P public packet-switched data
whose headquarters are outside Germany may be trans ­ networks through these proprietary interfaces, also
ferred to Atlas . for the provision of X.25 data communications

services, provided access granted to Atlas through
such interfaces is economically equivalent to
takings 28 . DT described and FT below have also . given the additional under ­ third-party Datex-P networks access . to the Transpac France and

1 . Use of DT and FPs public data networks

Each of FT and DT will as of 1 January 1996
establish and thereafter maintain third - party access to
their public switched data networks in France and
Germany respectively . Non-discriminatory, open and
transparent access will be granted to all data services
providers that offer X.25 packet-switched data
communications services . To ensure non-discrimi ­

natory access to their national public X.25 packet ­
switched data networks, FT and DT shall :

( a ) establish and maintain standardized X.75
interfaces to access their national public X.25
packet-switched data networks ; this intercon ­
nection is suitable for the provision of end-to-end
services based on X.25 specifications for end-user
access speeds up to 64 kbps ; and

( b ) offer such access on non-discriminatory terms,

including price, availability of volume or other
discounts and the quality of interconnection
provided .

FT and DT shall further ensure non-discriminatory
access by making publicly available the standard terms
and conditions for such X.75 interface standards,
including, if any, volume and other discounts, as of 1
January 1996 . FT and DT will make available for

inspection by the Commission any agreements relating
to such X.75 interfaces, including all specifically
agreed terms . Until such time as Transpac France and
Datex-P are integrated into Atlas, neither Transpac
France nor Datex-P shall disclose to Atlas any such
specifically agreed terms that are identified and main ­
tained as confidential by the party obtaining intercon ­
nection through such X.75 interfaces . Finally the
above obligations shall likewise apply to any generally
used CCITT-standardized interconnection protocol
that may modify, replace or co-exist as a standard
related to the X.75 standard and is used by FT and
DT .

Proprietary interfaces may be retained or established
among Transpac France, Datex-P and Atlas ; such
interfaces are defined by the particular type of tech ­
nology, hardware and software that a network
operator uses to provide advanced or customized

2 . Cross-subsidization

DT and FT shall not engage in cross-subsidization
within the meaning of the Commission 's competition
guidelines for the telecommunications sector ( n ) in
connection with the Atlas venture . To avoid that Atlas
benefits from cross-subsidies stemming from the
operation of public telecommunications infrastructure
and of reserved services by either DT or FT, all
entities formed pursuant to the Atlas venture will be
established as distinct entities separate from DT and
FT .

Atlas SA, Datex-P and Transpac France shall obtain
their own debt financing on their own credit,
provided that FT and DT :

( a ) may make capital contributions or commercially

reasonable loans to such entities as required to
enable Atlas SA, Dai:ex-P and Transpac France to
conduct their respective business ;

( b ) may pledge their venture interests in such entities,

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

( c ) may guarantee any indebtedness of such entities,

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

Atlas SA, Datex-P and Transpac France shall not
allocate directly or indirectly any part of their
operating expenses, costs, depreciation, or other
expenses of their business to any parts of FT or DT 's
business units ( including without limitation the
proportionate costs based on work actually performed
that are attributable to shared employees or sales or
marketing of Atlas products and services by DT or FT
employees ), provided however that nothing shall

(") Guidelines on the application of EEC Competition Rules in

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

15 . 12 . 95 1 EN I Official Journal of the European Communities No C 337 / 11

prevent Atlas SA, Datex-P and Transpac France from
billing DT or FT for products and services provided
to DT or FT by such entities on the basis of the same
price charged third parties ( in the case of products or
services sold to third parties in commercial quantities )
or full cost reimbursement or other arm 's length
pricing method ( in the case of products and services
not sold to third parties in commercial quantities ).

Atlas SA, Datex-P and Transpac France shall keep

separate accounting records that identify payments or
transfers to or from DT and FT . Moreover, Atlas SA,
Datex-P and Transpac France shall not receive any
material subsidy ( including forgiveness of debt )
directly or indirectly from DT or FT, or any
investment or payment from DT or FT that is not
recorded in the books of such entities as an

investment in debt or equity .

DT, FT and Atlas shall comply with the above until
the telecommunications infrastructure and services
markets in France and Germany are fully liberalized,
as is scheduled to occur by 1 January 1998 .

or Atlas 's business premises to inspect records and
documents covered by the above recording obli ­
gations and to receive oral explanations relating
to such documents .

( c ) Reporting obligations . DT, FT and Atlas also
undertake to provide the Commission 's Direc ­
torate-General for Competition, for the purpose
of ascertaining whether DT, FT and Atlas comply
with the requirements of the above undertakings,
with :

— any records and documents in the possession

or control of DT, FT or Atlas necessary for
that determination, and

— oral or written complementary explanations .

These recording and reporting obligations will remain
in force until the telecommunications infrastructure

Auditing

and services markets in France and Germany are fully
liberalized, as is scheduled to occur by 1 January
Atlas SA ( which includes its consolidated subsi ­ 1998 .
diaries ), Transpac Franc and Datex-P shall be audited
on a regular and customary basis, and such audit shall
confirm from an accounting viewpoint that the trans ­
actions between these entities, on the one hand, and 29 . In so far as related to existing obligations under
FT and DT, on the other hand, have been conducted national or Community law, the above is intended to
at arm 's length . This obligation shall remain in force ensure the parties ' firm commitment to comply with the
until the telecommunications infrastructure and applicable legal framework .
services markets in France and Germany are fully
liberalized, as is scheduled to occur by 1 January
1998 .

3 . Auditing

29 . 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
4 . Recording and reporting

To allow the Commission to monitor compliance with
the undertakings the parties have agreed the
following :

( a ) Recording obligations . DT, FT and Atlas each

undertake to keep records and documents suitable
to prove compliance with the terms of the above
undertakings ready for inspection by the
Commission .

( b ) Inspection of records . For the purpose of ascer ­

taining and ensuring compliance by DT, FT or
Atlas with the above undertakings, DT, FT or
Atlas shall, on reasonable notice, during office
hours, and without a need for the Commission to
invoke the powers of inspection pursuant to
Regulation No 17, give the Commission 's Direc ­
torate-General for Competition access to DT, FT

30 . In letters sent to the Commission, the French and
German Governments have undertaken to take the

necessary steps to liberalize alternative infrastructure for
the provision of liberalized telecommunications services
by 1 July 1996 and to liberalize the voice telephony
service and all telecommunications infrastructure fully by

1 January 1998 . The availability of alternative telecom ­
munications infrastructure in Germany and France
render competitors of Atlas independent of DT and FT 's
infrastructure for the purposes of creating trunk network
infrastructure to provide liberalized services .

Early alternative infrastructure liberalization in France
and Germany adds to a regulatory framework in the
home countries of the Atlas partners that is designed to
ensure a level playing field in the telecommunications
markets .

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

1 . France In this connection, FT 's data communications
services are already provided by a separate legal
entity .

1 . Separation of regulatory and operative functions

Pursuant to French law, the minister for telecom ­
munications shall ensure that regulation of the
telecommunications markets is undertaken separ ­
ately of service provision in these markets . A
specific national regulatory authority ( NRA ), the
Direction Generale des Postes et Telecommuni ­

cations ( DGPT ), is competent for licensing
providers of telecommunications networks and
services in France based on objective and trans ­
parent criteria . The DGPT shall survey FT 's
market behaviour and approve FTs tariffs for ( i )
reserved services and leased lines and ( ii ) such
liberalized services that are not in fact provided by
a third party active in the French market .

2 . Germany

1 . Separation of regulatory and operative functions

services in France based on objective and trans ­ Pursuant to the German 1989 Poststrukturgesetz,
parent criteria . The DGPT shall survey FT 's the 1994 Postneuordnungsgesetz and the 1994
market behaviour and approve FTs tariffs for ( i ) Post  - und Telekommunikation Regulierungsgesetz,
reserved services and leased lines and ( ii ) such regulatory competencies are assigned to a Federal
liberalized services that are not in fact provided by agency created under the Federal Ministry of Post
a third party active in the French market . and Telecommunications ( BMPT ) while telecom ­

munications operations are undertaken by DT, a
fully State-owned joint stock corporation . Regu ­
latory obligations of DT are policed by inde ­
2 . Non-discriminatory access pendent bodies, so-called regulatory chambers .

Further to the adoption of the Commission 's
Services Directive and the ONP Framework 2 . Non-discriminatory access
Directive ( 12 ) Article L. 32-1-4° of the French Law
of 29 December 1990 grants all users equal access
to the public network on objective, transparent and
non-discriminatory conditions . FT is under an obli ­ Under the current and future German regulatory
gation to effectively grant such access and must framework, DT shall provide third parties with
publish information on the network ( e.g. technical both access to monopoly infrastructure and
features, tariffs and usage conditions ) and on reserved or mandatory services on a non-discrimi ­
leased line offerings . The DGPT may verify FT 's natory and transparent basis according to objective
compliance with these obligations and investigate criteria . Upon application, DT shall supply state ­
complaints filed against FT for non-compliance of-the-art leased lines over service-neutral access
with these obligations . The DGPT shall further points without delay . With the only restriction of
ensure compliance with FT 's obligation to share voice telephony service provision, leased lines may
available transmission capacity for liberalized be freely interconnected and used for any service .
services with competitors and shall publish annual Leased lines must meet market demand and DT
statistical reports on FT 's compliance with these must publish data concerning availability and
obligations . quality of such lines .

3 . Prevention of cross-subsidies

To allow the DGPT to supervise FT 's market
behaviour, FT is under the legal obligation to keep
an analytical accounting system that relates costs to
each individual FT service . Where an offering
comprises the provision of both reserved and
liberalized services, FT must separate each kind of
service in the contract and in the invoice .

( l2 ) Council Directive of 28 June 1990 on the establishment of

the internal market for telecommunications services through
the implementation of open network provision ( OJ No L

192, 24 . 7 . 1990, p. 1 ).

3 . Prevention of cross-subsidies

The BMPT ( i ) shall approve both tariffs and other
price-sensitive contractual terms for DT 's reserved
services and ( ii ) may object to DT 's tariffs for
mandatory services . The BMPT may also seize
DT 's profits stemming from tariffs in excess of the
approved amount and take any measure necessary
to reestablish a fair competitive environment jeop ­
ardized by unlawful cross-subsidization . Moreover,
DT 's subsidiaries and affiliates shall use reserved

services for the provision of competitive services
under the same terms as DT 's customers and must

use such terms to account internal services transfer .

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

3 . Deutsche Telekom AG ( DT ) and France Telecom

prevent DT and / or FT, either separately or jointly,
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 .