CELEX: 32020M9679
Language: en
Date: 2020-04-03 00:00:00
Title: Commission Decision of 03/04/2020 declaring a concentration to be compatible with the common market (Case No COMP/M.9679 - UNITED GROUP / BULGARIAN TELECOMMUNICATIONS COMPANY) according to Council Regulation (EC) No 139/2004 (Only the English text is authentic)

EUROPEAN COMMISSION
                                                                Brussels, 3.4.2020
                                                                C(2020) 2211 final
                                                                                  PUBLIC VERSION
                                                                  In the published version of this decision,
                                                                  some information has been omitted pursuant
                                                                  to Article 17(2) of Council Regulation (EC)
                                                                  No 139/2004 concerning non-disclosure of
                                                                  business secrets and other confidential
                                                                  information. The omissions are shown thus
                                                                  […]. Where possible the information
                                                                  omitted has been replaced by ranges of
                                                                  figures or a general description.
                                                                To the notifying party
Subject:             Case M.9679 – United Group / Bulgarian Telecommunications
                     Company
                     Commission decision pursuant to Article 6(1)(b) of Council Regulation
                     No 139/20041 and Article 57 of the Agreement on the European Economic
                     Area2
Dear Sir or Madam,
(1)      On 28 February 2020, the European Commission received notification of a proposed
         concentration pursuant to Article 4 of Council Regulation (EC) No 139/2004 3, by
         which United Group B.V. (“United Group” or the “Notifying Party”), through United
         Group Bulgaria (“UGB”, Bulgaria),4 will acquire within the meaning of
         Article 3(1)(b) sole control of Viva Telecom Bulgaria OOD (“Viva”) and its
         subsidiary, the Bulgarian Telecommunications Company EAD (Viva and BTC being
         collectively referred to as “BTC” or the “Target”),5 This operation is hereafter
1     OJ L 24, 29.1.2004, p. 1 (the 'Merger Regulation'). With effect from 1 December 2009, the Treaty on the
      Functioning of the European Union ('TFEU') has introduced certain changes, such as the replacement of
      'Community' by 'Union' and 'common market' by 'internal market'. The terminology of the TFEU will be
      used throughout this decision.
2     OJ L 1, 3.1.1994, p. 3 (the 'EEA Agreement').
3     OJ L 24, 29.1.2004, p. 1 (the ‘Merger Regulation’).
4     UGB is the special purpose vehicle created by United Group for the acquisition of BTC.
5     BTC’s subsidiaries include BTC, NURTS Bulgaria EAD, BTC Net EOOD, NURTS digital EAD, Net is
      Sat EOOD.
Commission européenne, DG COMP MERGER REGISTRY, 1049 Bruxelles, BELGIQUE
Europese Commissie, DG COMP MERGER REGISTRY, 1049 Brussel, BELGIË
Tel: +32 229-91111. Fax: +32 229-64301. E-mail: COMP-MERGER-REGISTRY@ec.europa.eu.
 ---pagebreak---        referred to as the “Transaction” and United Group and BTC are referred to as the
       “Parties”.
1.      THE PARTIES
(2)    United Group is active in the provision of telecoms and media in South East Europe,
       where it operates a multi-play cable and media platform. United Group’s activities
       focus on the production of Pay-TV channels and content, distribution of content, retail
       distribution of Pay-TV services, broadband internet and fixed and mobile
       telecommunication services. Within the EEA, United Group is active in Slovenia
       (through the “Telemach” brand) and Croatia (through the recently acquired
       telecommunication provider Tele2 Croatia). In Bulgaria, United Group is active only
       as a provider of Pay-TV services through Internet, via its wholly-owned subsidiary
       Solford Trading Limited ("Solford").
(3)    BTC is a telecommunications operator, active in Bulgaria where it operates under the
       brand name “Vivacom”. BTC provides fixed and mobile telecommunication services,
       broadband internet and TV distribution services (via the Internet and satellite).
2.      THE OPERATION
(4)    The Transaction consists of an acquisition of shares. Pursuant to a share and purchase
       agreement of 7 November 2019, UGB will acquire all issued share capital of Viva
       from InterV Investment S.a.r.l.” (“InterV”, Luxembourg).
(5)    Viva is a limited liability company which was previously held by InterV (51.27%)
       and BTC (48.73%).6 As a result of a cross-shareholding restructuring plan, InterV is
       the sole shareholder of Viva. Viva owns directly or indirectly 100% of the issued
       capital of the following undertakings: the Bulgarian Telecommunications Company
       EAD and its subsidiaries NURTS Bulgaria EAD, BTC Net EOOD, NURTS digital
       EAD, Net is Sat EOOD (together referred to as BTC, see paragraph 1).
(6)    United Group is ultimately solely controlled by BC Partners LLP (“BC Partners”,
       United Kingdom), an international private equity firm, whose sole activity is to
       provide advisory services.7
(7)    Upon completion of the Transaction, United Group will thus acquire, via UGB, sole
       control of the whole of BTC. The Transaction, therefore, constitutes a concentration
       within the meaning of Article 3(1)(b) of the Merger Regulation.
3.      EU DIMENSION
(8)    The undertakings concerned have a combined aggregate worldwide turnover of more
       than EUR 5 billion (EUR […]). Each United Group and BTC has an EU-wide
6   Pursuant to a cross-shareholding restructuring plan, the Bulgarian Telecommunications Company EAD
    surrendered its shareholding and thus ceased to be a shareholder of Viva.
7   BC Partners’ acquisition of United Group has been approved by the Commission in Case M.9152 of
    17 December 2018.
                                                           2
 ---pagebreak---        turnover of more than EUR 250 million (United Group: EUR […] million, BTC:
       EUR […] million). Neither of the undertakings concerned achieves more than two
       thirds of their respective EU-wide turnover in one and the same Member State.
(9)    Therefore, the Transaction has a Union dimension pursuant to Article 1(2) of the
       Merger Regulation.
4.       RELEVANT MARKETS
(10) The Transaction leads to a very limited horizontal overlap between the Parties’
       activities in the retail supply of Pay-TV services (via Over-the-top services or “OTT”)
       in Bulgaria.
(11) The Transaction also gives rise to vertical relationships in connection with:
            •    at the upstream level: the supply of (i) wholesale international roaming and
                 (ii) wholesale call terminations services on mobile and fixed networks in the
                 countries where United Group and BTC operate
            •    at the downstream level: (i) retail fixed telephony services and (ii) retail
                 mobile telecommunications services in the countries where United Group and
                 BTC operate (see table 3).8
       4.1.    Retail supply of TV services
(12) In the market for the retail provision of TV services, TV distributors provide end
       users with TV services, which typically consist of: (i) linear TV channels or packages
       of linear TV channels (the latter either acquired or produced themselves) and
       (ii) content aggregated in non-linear services, such as Subscription Video on Demand
       (“SVOD”), Transactional VOD (“TVOD”) and Advertising VOD (“AVOD”). TV
       content can be delivered to end users through several platforms including cable,
       satellite (“direct-to-home” or “DTH”), IPTV and as OTT. OTT players deliver
       channels and content in both a linear and non-linear fashion through the use of
       internet.
(13) BTC (under the brand Vivacom) distributes Pay-TV services in Bulgaria through the
       Internet (both IPTV and OTT) and also through satellite. United Group offers TV
       services via cable, satellite (DTH) and Internet (OTT) in a number of countries,
8   At the time of notification of Case M.9152 (BC Partners/United Group), funds advised by BC Partners
    [Information on corporate governance] in Intelsat, which is active in the provision of satellite transponder
    of capacities. BTC is active in the provision of retail TV services through DTH and provides satellites
    services through its satellite station, Plana Teleport. BTC thus purchases transponder capacities from
    Intelsat. Following a block trade, BC Partners’ shareholding into Intelsat has been reduced [Information
    on corporate governance]. The Parties submit that […]See Form CO, paragraphs 64-70.
                                                          3
 ---pagebreak---        including Slovenia and Croatia.9 Its OTT services are offered internationally
       (including in Bulgaria) under the “Net.TV.Plus” brand.10
             4.1.1.    Relevant product markets
(14) In its previous decisions, the Commission has considered the retail provision of free-
       to-air (“FTA”) and Pay-TV services as separate product markets but ultimately left
       open the product market definition. In addition, the Commission has considered
       whether a further segmentation shall be made according to: (i) linear vs. non-linear
       TV services, (ii) distribution technologies (e.g. Cable, OTT, satellite, IPTV or
       terrestrial) and (iii) premium Pay-TV vs. basic Pay-TV services but has left the
       market open with regard to each of these potential sub-segments. 11
(15) The Notifying Party submits that the relevant product market is the retail distribution
       of Pay TV, encompassing: (i) all distribution technologies, (ii) non-linear and linear
       content, and (iii) basic and premium Pay TV. In particular, the Notifying Party does
       not consider it necessary, for the purpose of the present notification, to segment the
       market for provision of TV services to end users according to distribution platform. In
       the Notifying Party’ view, the precise product market can be left open, since the
       Transaction does not give rise to any competitive concerns irrespective of the precise
       product market definition.
(16) The Commission considers that for the purpose of the present decision the question
       whether (i) FTA services and Pay TV services, (ii) linear Pay TV services and non-
       linear Pay TV services, (iii) different distribution technologies, and (iv) basic Pay TV
       services and premium Pay TV services belong to the same product markets can be left
       open as the Transaction does not raise serious doubts as to its compatibility with the
       internal market or the functioning of the EEA Agreement under any of the narrowest-
       possible product market definitions set out in this paragraph.
             4.1.2.    Geographic market definition
(17) In previous decisions, the Commission has considered that the geographic scope of
       the market for the retail provision of TV services is national (since suppliers of retail
       TV services compete on a national level) or, at most, limited to the coverage area of
       each cable operator.12
9   United Group offers cable Pay TV through its SBB/Telemach brand, and DTH Pay TV through its Total
    TV brand in Slovenia, Serbia, Montenegro, Bosnia and Herzegovina and North Macedonia (Total TV
    only). United Group owns three national TV stations which include Nova TV in Croatia, Nova BH in
    Bosna and Herzegovina, and Nova M in Montenegro.
10   In Bulgaria, United Group is active only as a provider of OTT services through its wholly-owned
    subsidiary Solford. “Net.TV.Plus” targets the ex-Yugoslavian diaspora, with a focus on channels in
    Serbian/Croatian/Bosnian language.
11  Commission decision of 7 April 2017 in case M.8354, Fox/Sky, paragraphs 80 and 81; Commission
    decision of 24 February 2015 in case M.7194, Liberty Global / Corelio / W&W / De Vijver Media,
    paragraph 90.
12  Commission decision of 8 December 2018 in case M.8842 – Tele2/Com Hem Holding paragraphs 37-38,
    Commission decision of 24 February 2015 in case M.7194, Liberty Global / Corelio / W&W / De Vijver
    Media, paragraphs 117-132; Commission decision of 15 April 2013 in case M.6880, Liberty
    Global/Virgin Media, paragraphs 44-50; Commission decision of 21 December 2010 in case M.5932,
    News Corp/BskyB, paragraphs 86–88.
                                                      4
 ---pagebreak--- (18) The Notifying Party submits that the precise geographic scope of the market can be
       left open, given that the Transaction does give rise to competitive concerns
       irrespective of the precise geographic market definition.
(19) For the purpose of the present decision, the Commission considers that the relevant
       market for the retail supply of TV services is national in scope. The Commissin
       considers that the competitive assessment in Section 5.3 would remain the same also
       on a geographic market comprising the coverage area of each cable operator.
      4.2.    Retail mobile communication services
(20) Mobile telecommunications services to end customers, or "retail mobile services",
       include services for national and international voice calls, SMS (including MMS and
       other messages), mobile internet with data services, access to content via the mobile
       network and retail international roaming services.
             4.2.1.     Product market definition
(21) In previous decisions, the Commission has not further segmented the overall retail
       mobile market based on the type of service (voice calls, SMS, MMS, mobile Internet
       data services), or the type of network technology. The Commission has considered
       possible segments of the overall retail market for mobile telecommunication services
       by distinguishing between pre-paid and post-paid services and between private
       customers and business customers, concluding that these did not constitute separate
       product markets but rather were market segments within an overall retail market.13
(22) The Notifying Party submits that, in the present case, the relevant product market
       should be defined in line with the Commission’s previous decisional practice, i.e. as
       the overall retail market for the mobile telecommunication services without further
       segmentation.
(23) For the purpose of the present decision, the Commission considers that the exact
       product market definition in relation to the provision of retail mobile
       telecommunications services (whether there is an overall market for retail mobile
       communication services or whether this market should be segmented between pre-
       paid and post-paid or between private and business customers) can be left open as the
       Transaction does not give rise to serious doubts as to its compatibility with the
       internal market or the functioning of the EEA Agreement under any such product
       market definition.
13  Commission decision of 15 July 2019 in case M.9370, Telenor/DNA, paragraphs 40-42; Commission
    decision of 27 July 2018 in case M.8883, PPF/Telenor Target Companies, paragraphs 12-13; Commission
    decision of 27 November 2018 in case M.8792, T-Mobile NL/Tele2 NL, paragraphs 157-160;
    Commission decision of 4 April 2007 in Case M.4591, Weather Investments/Hellas Telecommunications,
    paragraph 10.
                                                       5
 ---pagebreak---              4.2.2.    Geographic market definition
(24) In previous decisions, the Commission has consistently found the market for retail
       mobile communication services to be national in scope.14
(25) The Notifying Party considers that the market should be considered national in scope
       in line with previous Commission decisions.
(26) For the purpose of the present decision, the Commission considers the market for
       retail mobile services to be national in scope, notably taking into account the fact that
       licences to mobile operators are granted on a national basis.
      4.3.     Retail supply of fixed telephony services
(27) Fixed telephony services comprise the provision of connection services at a fixed
       location or access to the public telephone network, for the purpose of making and/or
       receiving calls and related services.
             4.3.1.    Product market definition
(28) In previous decisions, the Commission considered that managed Voice over Internet
       Protocol (“VoIP”) services and fixed voice services provided through fixed lines are
       interchangeable and therefore belong to the same market.15
(29) The Notifying Party submits that the relevant product market should be defined, in
       line with previous Commission decisions, as the overall retail market for fixed line
       telephony services, including VoIP services.
(30) For the purpose of the present decision, the Commission considers that the exact
       product market definition (whether there is an overall market for the retail supply of
       fixed telephony services or whether this market should be segmented into fixed voice
       services and VoIP services) can be left open as the Transaction does not give rise to
       serious doubts as to its compatibility with the internal market or the functioning of the
       EEA Agreement under any such possible product market definition.
             4.3.2.    Geographic market definition
(31) In previous decisions, the Commission has consistenly found the market for the
       supply of fixed telephony services to be national in scope, as this reflects the
       continuing importance of the role of national regulation in the telecommunications
       sector, the supply of upstream wholesale services on a national basis, as well as the
       fact that the pricing policies of telecommunications providers are predominantly
       national.16
14  Commission decision of 15 July 2019 in case M.9370, Telenor/DNA, para 44-46; Commission decision of
    27 July 2018 in case M.8883, PPF/Telenor Target Companies, paragraphs 15-16; Commission decision of
    27 November 2018 in case M.8792, T-Mobile NL/Tele2 NL.
15  Commission decision of 3 August 2016 in case M.7978, Vodafone/Liberty Global/Dutch JV,
    paragraphs 24-26; Commission decision of 4 February 2016 in case M.7637, Liberty Global/BASE
    Belgium, paragraphs 67-69.
16  Commission decision of 27 November 2018 in case M.8792, T-Mobile NL/Tele2 NL, paragraph 274;
    Commission decision of 15 July 2019 in case M.9370, Telenor/DNA; Commission decision of
                                                       6
 ---pagebreak--- (32) The Notifying Party considers the market to be national in scope, based on the
       Commission's precedents.
(33) For the purpose of the present decision, the Commission considers that the market for
       the supply of fixed telephony services is national in scope.
       4.4.   Wholesale market for mobile and fixed call termination services
(34) Call termination is the service provided by a network operator on the supply side to
       other network operators on the demand side, whereby a call originating in a demand
       side operator's network is delivered to a user in the supply side operator's network.
       This service is required by every originating operator, as it is necessary for its
       customers to be able to communicate with the customers of other networks. Call
       termination is therefore a wholesale service that is resold or used as an input for the
       provision of downstream retail telephony and mobile services. In previous decisions,
       the Commission has identified relevant markets for the provision of wholesale call
       termination on mobile and fixed networks.
             4.4.1.    Wholesale market for mobile call termination services
                       4.4.1.1.  Product market definition
(35) In previous decisions, the Commission has found that there is no substitute for call
       termination on each individual network as the operator transmitting the call can reach
       the intended recipient only through the operator of the network to which the recipient
       is connected.17
(36) The Notifying Party, in accordance with Commission’s past practice, submits that the
       relevant product market is the market for wholesale call termination services.
(37) For the purpose of the present decision, the Commission considers that, as regards
       wholesale call termination services, termination on each individual mobile network
       constitutes a separate product market.
                       4.4.1.2.  Geographic market definition
(38) In previous decision, the Commission considered that the market for wholesale
       mobile call termination services is national in scope, as each wholesale market for call
       termination corresponds to the dimensions of the operator’s network and therefore is
       limited to the national territory of the operator's network.18 This is primarily due to
    27 July 2018 in case M.8883, PPF/Telenor Target Companies, paragraph 22; Commission decision of 3
    August 2016 in case M.7978, Vodafone/Liberty Global/Dutch JV, paragraph 40; Commission decision of
    4 February 2016 in case M.7637, Liberty Global/BASE Belgium, paragraph 73.
17  Commission decision of 27 November 2018 in case M.8792, T-Mobile NL/Tele2 NL, paragraph 259;
    Commission decision of 15 July 2019 in case M.9370, Telenor/DNA, paragraph 70; Commission decision
    of 27 July 2018 in case M.8883, PPF/Telenor Target Companies, paragraph 26; Commission decision of
    12 December 2012 in case M.6497, Hutchison 3G Austria/Orange Austria, paragraph 68.
18  Commission decision of 27 November 2018 in case M.8792, T-Mobile NL/Tele2 NL, paragraph 263;
    Commission decision of 15 July 2019 in case M.9370, Telenor/DNA, paragraph 73; Commission decision
    of 27 July 2018 in case M.8883, PPF/Telenor Target Companies, paragraph28; Commission decision of
    3 August 2016 in case M.7978, Vodafone/Liberty Global/Dutch JV, para 196.
                                                      7
 ---pagebreak---        regulatory barriers as the geographic scope of a network licence is, in principle,
       limited to areas which do not extend beyond the borders of a Member State.
(39) In line with previous Commission decisions, the Notifying Party submits that the
       market for wholesale mobile call termination services should be considered national
       in scope.
(40) For the purpose of the present decision, the Commission considers that the market for
       wholesale mobile call termination services is national in scope.
             4.4.2.     Wholesale market for fixed call termination services
                        4.4.2.1.  Product market definition
(41) As in the case of wholesale mobile call termination services, in previous decisions the
       Commission has established that there are no potential substitutes for call termination
       on each fixed network since the operator transmitting the call can reach the intended
       recipient only through the operator of the network to which the recipient is
       connected.19
(42) The Notifying Party, in accordance with Commission’s decisional practice, submits
       that the relevant product market is the market for wholesale call termination services
       on fixed networks.
(43) For the purpose of the present decision, the Commission considers that, as regards
       wholesale call termination services, termination on each individual fixed network
       constitutes a separate product market.
            4.4.2.2.    Geographic market definition
(44) In previous decisions, the Commission has found that the market for wholesale fixed
       call termination services is national in scope, considering that the geographic scope of
       each wholesale market for call termination should correspond to the dimensions of the
       operator’s network, which is limited to national borders due to regulatory barriers. 20
(45) The Notifying Party submits that, in line with previous Commission decisions, market
       for wholesale fixed call termination services is national.
(46) For the purpose of the present decision, the Commission considers that the market for
       wholesale fixed call termination services is national in scope.
19  Commission decision of 27 November 2018 in case M.8792, T-Mobile NL/Tele2 NL, paragraph 259,
    Commission decision of 15 July 2019 in case M.9370, Telenor/DNA, paragraph78, Commission decision
    of 27 July 2018 in case M.8883, PPF/Telenor Target Companies, paragraph 32; Commission decision of
    12 December 2012 in case M.6497, Hutchison 3G Austria/Orange Austria, paragraph 68.
20  Commission decision of 27 November 2018 in case M.8792, T-Mobile NL/Tele2 NL, paragraph 263;
    Commission decision of 15 July 2019 in case M.9370, Telenor/DNA, paragraph 81; Commission decision
    of 27 July 2018 in case M.8883, PPF/Telenor Target Companies, paragraph 35; Commission decision of 3
    August 2016 in case M.7978, Vodafone/Liberty Global/Dutch JV, paragraph 210.
                                                       8
 ---pagebreak---        4.5.   Wholesale international roaming services
(47) International roaming services allow mobile telecommunication subscribers to make
       and receive calls and use other services such as text messages and data services, when
       abroad. To offer such services to their end-users, Mobile Network Operators
       (“MNOs”) conclude wholesale agreements with one another providing access and
       capacity on mobile networks in the foreign country. MNOs select their partner
       operators based on network coverage, price, network quality and reciprocity. Demand
       for wholesale international roaming services comes (i) from foreign mobile operators
       who wish to provide their own customers with mobile services outside their own
       network and also downstream (ii) from subscribers wishing to use their mobile
       telephones outside their own countries.
             4.5.1.    Product market definition
(48) In previous decisions, the Commission has considered a separate product market for
       wholesale international roaming services comprising both terminating calls and
       originating calls. 21
(49) In line with Commission’s decisional practice, the Notifying Party submits that the
       relevant product market is the wholesale market for international roaming. In
       particular, the Notifying Party considers that the wholesale international roaming
       market encompasses all mobile operators in a given country.
(50) For the purpose of the present decision, the Commission considers that the relevant
       product market is the wholesale market for international roaming services comprising
       both terminating and originating calls without distinguishing by mobile operator in a
       certain country.
             4.5.2.    Geographic market definition
(51) In previous decisions, the Commission found that the relevant geographic market is
       national in scope due to the existence of regulatory barriers to offering mobile
       services. 22
(52) The Notifying Party agrees with this approach and submits that the revelant
       geographic market is national.
(53) For the purpose of the present decision, the Commission considers that the market for
       wholesale international roaming services is national in scope.
21  Commission decision of 27 November 2018 in case M.8792, T-Mobile NL/Tele2 NL, paragraph 250;
    Commission decision of 15 July 2019 in case M.9370, Telenor/DNA, paragraphs 59-61; Commission
    decision of 27 July 2018 in case M.8883, PPF/Telenor Target Companies, paragraph40; Commission
    decision of 1 March 2010 in case M.5650, T-Mobile/Orange, paragraphs 32-34.
22  Commission decision of 27 November 2018 in case M.8792, T-Mobile NL/Tele2 NL, paragraph 251;
    Commission decision of 15 July 2019 in case M.9370, Telenor/DNA, paragraph 65; Commission decision
    of 27 July 2018 in case M.8883, PPF/Telenor Target Companies, paragraph 43; Commission decision of
    3 August 2016 in case M.7978 Vodafone/Liberty Global/Dutch JV, paragraph 202.
                                                       9
 ---pagebreak--- 5.   COMPETITIVE ASSESSMENT
      5.1.    Analytical framework
(54) Under Article 2(2) and (3) of the Merger Regulation, the Commission must assess
       whether a proposed concentration would significantly impede effective competition in
       the internal market or in a substantial part of it, in particular through the creation or
       strengthening of a dominant position.
(55) In this respect, a merger may entail horizontal and/or non-horizontal effects.
       Horizontal effects are those deriving from a concentration where the undertakings
       concerned are actual or potential competitors of each other in one or more of the
       relevant markets concerned. Non-horizontal effects are those deriving from a
       concentration where the undertakings concerned are active in different relevant
       markets.
(56) With regard to non-horizontal mergers, two broad types can be distinguished: vertical
       and conglomerate mergers. Vertical mergers involve companies operating at different
       supply chain levels.
(57) The Commission appraises horizontal effects in accordance with the guidance set out
       in the relevant notice, that is to say the Horizontal Merger Guidelines. 23 Additionally,
       the Commission appraises non-horizontal effects in accordance with the guidance set
       out in the relevant notice, that is to say the Non-Horizontal Merger Guidelines. 24
      5.2.    Identification of affected markets
(58) The Transaction gives rise to horizontally affected market(s) in the retail supply of
       Pay-TV services (and possible segments) in Bulgaria.
(59) The Transaction also gives rise to vertically affected markets in relation to (i) the
       upstream provision of wholesale mobile call terminations services and the
       downstream provision of retail mobile telecommunication services in Bulgaria,
       Slovenia and Croatia and (ii) the upstream provision of wholesale fixed call
       termination services and the downstream provision of retail fixed telephony services
       in Bulgaria and Slovenia.
      5.3.    Horizontal non-coordinated effects
            5.3.1.     Introduction
(60) The Horizontal Merger Guidelines distinguish between two main ways in which a
       concentration between actual or potential competitors on the same relevant market
23  Guidelines on the assessment of horizontal mergers under the Council Regulation on the control of
    concentrations between undertakings ("Horizontal Merger Guidelines"), OJ C 31, 05.02.2004.
24  Guidelines on the assessment of non-horizontal mergers under the Council Regulation on the control of
    concentrations between undertakings ("Non-Horizontal Merger Guidelines"), OJ C 265, 18.10.2008.
                                                      10
 ---pagebreak---        may significantly impede effective competition, namely coordinated and non-
       coordinated effects.25
(61) Under the substantive test set out in Article 2(2) and (3) of the Merger Regulation,
       also mergers that do not lead to the creation or the strengthening of the dominant
       position of a single firm may be incompatible with the internal market.
(62) The Horizontal Merger Guidelines describe horizontal non-coordinated effects as
       follows: “A merger may significantly impede effective competition in a market by
       removing important competitive constraints on one or more sellers who consequently
       have increased market power. The most direct effect of the merger will be the loss of
       competition between the merging firms. For example, if prior to the merger one of the
       merging firms had raised its price, it would have lost some sales to the other merging
       firm. The merger removes this particular constraint. Non-merging firms in the same
       market can also benefit from the reduction of competitive pressure that results from
       the merger, since the merging firms’ price increase may switch some demand to the
       rival firms, which, in turn, may find it profitable to increase their prices. The
       reduction in these competitive constraints could lead to significant price increases in
       the relevant market.”26
(63) Therefore, a merger giving rise to such non-coordinated effects might significantly
       impede effective competition by creating or strengthening the dominant position of a
       single firm, one which, typically, would have an appreciably larger market share than
       the next competitor post-merger.
              5.3.2.      Retail supply of TV services
                        5.3.2.1.     Horizontally affected markets
(64) The Parties’ activities overlap in the market(s) for the retail supply of TV services in
       Bulgaria, in particular, in a possible segment for the provision of OTT services. In this
       segment United Group is active globally, including in Bulgaria.
(65) The tables below illustrate BTC’s and its main competiors’ market shares in 2018
       both in value and in volume (by number of subscribers) in Bulgaria.27
25  The Commission has not found any indications that the present Transaction could give rise to coordinated
    effects in relation to the horizontally affected market identified in Section 5.2. No related complaints have
    been received during the market investigation.
26  Horizontal Merger Guidelines, paragraph 24.
27  Considering alternative segmentations of the market for retail supply of Pay-TV services, based on the
    Notifying Party’s submission, BTC's market shares in the possible segments for premium and basic Pay-
    TV services, in 2018 was [20-30]% in premium Pay-TV services and [20-30]% in basic Pay-TV services.
    According to the Notifying Party, market shares BTC and United Group achieved in the possible segment
    for linear and non-linear Pay-TV services are unlikely to be significantly different from the overall market
    including both linear and non-linear Pay-TV services. Therefore, BTC’s market share in alternative
    segments of the market for the retail supply of Pay-TV services does not materially differ from the market
    shares in the overall market for the retail supply of Pay-TV services.
                                                            11
 ---pagebreak---  ---pagebreak--- (69) First, the Transaction results in an increment of less than [0-5]% (even in the
    narrowest possible segment for retail supply of Pay-TV services distributed through
    OTT). In the Notifying Party’s view, [UG strategy regarding the Bulgarian market]. This
    is demonstrated by the very limited number of subscribers (amounted to […]) and
    revenues (EUR […]) generated from that activity in 2018. In addition, United Group’s
    OTT services provided under “Net.TV.Plus”, target the ex-Yugoslavian diaspora, with a
    focus on channels in Serbian/Croatian/Bosnian language, indicating further that [UG
    strategy regarding the Bulgarian market].
(70) Second, the Notifying Party submits that post-Transaction, the merged entity will
       continue to face strong competitive pressure from telecom operators providing such
       services, as well as from global or regional OTT platforms (such as Netflix and
       Amazon Prime).
                       5.3.2.3.    The Commission’s assessment
(71) The Commission considers that the Transaction does not give rise to horizontal non-
       coordinated effects in the market(s) for retail supply of Pay-TV services (and its
       possible sub-segments) in Bulgaria for the reasons set out below.
(72) First, in the overall market for retail supply of Pay-TV services as demonstrated at
       Table 1, the Parties’ combined market share based on 2018 figures would be below
       25% in volume and in value. In the plausible narrower market for retail supply of
       Pay-TV services via OTT, BTC’s market share is [20-30]% in volume and [50-60]%
       in value based on 2018 figures. However, the increment brought by the Transaction
       would be below [0-5]% in view of the limited revenues and number of subscribers of
       United Group as set out at paragraph (67), even in the narrowest plausible segment.
       Therefore, the Transaction, will not significantly affect the structure of the market.
(73) Second, post-Transaction there will remain a sufficient number of alternative
       suppliers in both the overall market for retail supply of Pay-TV services and the
       narrower market for the provision of OTT services to maintain a similar level of
       competition.
(74) Third, the results of the market investigation did not indicate any issues related to the
       horizontal overlap between the Parties’ activities in the market(s) for retail supply of
       Pay-TV services (even if we assumed a segmentation per distribution technology) in
       Bulgaria. 29
(75) Based on the above, the Commission concludes that the Transaction does not raise
       serious doubts as to its compatibility with the internal market with respect to
       horizontal non-coordinated effects.
       5.4.   Vertical effects
             5.4.1.     Introduction
(76) A merger between companies which operate at different levels of the supply chain
       may significantly impede effective competition if such merger gives rise to
29  See replies to questionnaire Q3 –Questionnaire to TV competitors, questions 5.1 and 5.2.
                                                        13
 ---pagebreak---        foreclosure.30 Foreclosure occurs where actual or potential competitors' access to
       supplies or markets is hampered or eliminated as a result of the merger, thereby
       reducing those companies' ability and/or incentive to compete.31 Such foreclosure
       may discourage entry or expansion of competitors or encourage their exit.32
(77) The Non-Horizontal Merger Guidelines distinguish between two forms of foreclosure.
       Input foreclosure occurs where the merger is likely to raise the costs of downstream
       competitors by restricting their access to an important input. Customer foreclosure
       occurs where the merger is likely to foreclose upstream competitors by restricting
       their access to a sufficient customer base.33
(78) Pursuant to the Non-Horizontal Merger Guidelines, input foreclosure arises where,
       post-merger, the new entity would be likely to restrict access to the products or
       services that it would have otherwise supplied absent the merger, thereby raising its
       downstream rivals' costs by making it harder for them to obtain supplies of the input
       under similar prices and conditions as absent the merger. 34
(79) For input foreclosure to be a concern, the merged entity should have a significant
       degree of market power in the upstream market. Only when the merged entity has
       such a significant degree of market power, can it be expected that it will significantly
       influence the conditions of competition in the upstream market and thus, possibly, the
       prices and supply conditions in the downstream market.35.
(80) In assessing the likelihood of an anticompetitive input foreclosure scenario, the
       Commission examines, first, whether the merged entity would have, post-merger, the
       ability to substantially foreclose access to inputs, second, whether it would have the
       incentive to do so, and third, whether a foreclosure strategy would have a significant
       detrimental effect on competition downstream.36
(81) Pursuant to the Non-Horizontal Merger Guidelines, customer foreclosure may occur
       when a supplier integrates with an important customer in the downstream market and
       because of this downstream presence, the merged entity may foreclose access to a
       sufficient customer base to its actual or potential rivals in the upstream market (the
       input market) and reduce their ability or incentive to compete, which in turn, may
       raise downstream rivals' costs by making it harder for them to obtain supplies of the
       input under similar prices and conditions as absent the merger. This may allow the
       merged entity profitably to establish higher prices on the downstream market.37
(82) For customer foreclosure to be a concern, a vertical merger must involve a company
       which is an important customer with a significant degree of market power in the
       downstream market. If, on the contrary, there is a sufficiently large customer base, at
30  Guidelines on the assessment of non-horizontal mergers under the Council Regulation on the control of
    concentrations between undertakings ("Non-Horizontal Merger Guidelines"), OJ C 265, 18.10.2008, p. 11,
    paragraphs. 17-18.
31  See Non-Horizontal Guidelines, paragraph 18.
32  See Non-Horizontal Guidelines, paragraph 29.
33  See Non-Horizontal Guidelines, paragraph 30.
34  See Non-Horizontal Guidelines, paragraph 31.
35  See Non-Horizontal Guidelines, paragraph 35.
36  See Non-Horizontal Guidelines, paragraph 32.
37  See Non-Horizontal Guidelines, paragraph 58.
                                                      14
 ---pagebreak---        present or in the future, that is likely to turn to independent suppliers, the Commission
       is unlikely to raise competition concerns on that ground. 38
(83) In assessing the likelihood of an anticompetitive customer foreclosure scenario, the
       Commission examines, first, whether the merged entity would have the ability to
       foreclose access to downstream markets by reducing its purchases from its upstream
       rivals, second, whether it would have the incentive to reduce its purchases upstream,
       and third, whether a foreclosure strategy would have a significant detrimental effect
       on consumers in the downstream market.39
             5.4.2.   Vertically affected markets
(84) As set out at paragraph (34), call termination service is the wholesale service
    provided by network operators that allows users of different networks to communicate
    with each other. The market for wholesale termination of calls on mobile fixed networks
    is therefore vertically related to the retail markets for fixed and mobile telephony
    services.n this regard, the Transaction gives rise to the below vertically affected markets
    in the telecommunications sector.
                 (a) the upstream market for the wholesale provision of call termination
                     services on United Group’smobile networks in Slovenia (Telemach) and
                     Croatia (Tele2) in connection with the downstream maket for the retail
                     provision of mobile and fixed telephony services in Bulgaria;
                 (b) the upstream market for the wholesale provision of call termination
                     services on United Group’s fixed networks in Slovenia (Telemach) in
                     connection with the downstream maket for the retail provision of mobile
                     and fixed telephony services in Bulgaria (BTC);
                 (c) the upstream market for the wholesale provision of call termination
                     services on BTC’s mobile network in Bulgaria, in connection with the
                     downstream maket for the retail provision of mobile services in Slovenia
                     and Croatia;
                 (d) the upstream market for the wholesale provision of call termination
                     services on BTC’s fixed network in Bulgaria, in connection with the
                     downstream maket for the retail provision of fixed telephony services in
                     Slovenia and Croatia.
38  See Non-Horizontal Guidelines, paragraph 61.
39  See Non-Horizontal Guidelines, paragraph 59.
                                                      15
 ---pagebreak---     Table 3: Vertically affected markets in Bulgaria, Slovenia and Croatia
             (1)     Upstream markets                  (2)     Downstream markets
       Wholesale mobile call termination (i) Retail mobile
       services in:                               telecommunications services in:
       - United Group: 100% in Slovenia; - BTC: [20-30]% in Bulgaria
       100% in Croatia
                                                  (ii) Retail fixed telephony services
                                                  in:
                                                  (3)      - BTC: [80-90]% in Bulgaria
       Wholesale mobile call termination (i) Retail mobile
       services in:                               telecommunications services in:
       - BTC: 100% in Bulgaria                    -      United Group: [10-20%]         in
                                                  Slovenia; [20-30]% in Croatia
                                                  (ii) Retail fixed telephony services
                                                  in:
                                                   -   United Group:       [20-30]%     in
                                                       Slovenia
       Wholesale fixed call termination in:       (i) Retail mobile
                                                  telecommunications services in:
        - United Group: 100% in Slovenia
                                                  - BTC [20-30]% in Bulgaria
                                                  (ii) Retail fixed telephony services
                                                  in:
                                                   -   BTC: [80-90]% in Bulgaria
       Wholesale fixed call termination in:       (i) Retail mobile
                                                  telecommunications services in:
       - BTC 100% in Bulgaria
                                                  - United Group: [10-20]% in Slovenia;
                                                  [20-30]% in Croatia (ii) Retail fixed
                                                  telephony services in:
                                                  - United Group [20-30]% in Slovenia
(85) The Transaction gives rise to a vertical link in (i) the wholesale markets for
      international roaming services in Slovenia (United Group) and Croatia (United
      Group) in relation to the downstream markets for the retail provision of mobile
      communication services in Bulgaria (BTC); and (ii) the wholesale markets for
      international roaming services in Bulgaria (BTC), in relation to the downstream
      markets for the retail provision of mobile communication services in Slovenia (United
                                                  16
 ---pagebreak---  ---pagebreak---  ---pagebreak---        majority of cases, the identity of the customer purchasing termination services is not
       known because international calls are mostly made over international carriers who act
       as intermediaries between the telecommunication operators.46
                       5.4.3.1.2. The Commission's assessment
(92) The Commission considers that the Transaction does not give rise to serious doubts as
       to its compatibility with the internal market in relation to the vertical link between the
       upstream market for wholesale mobile call termination services and the downstream
       markets for retail supply of fixed telephony services and retail supply of mobile
       telecommunication services, for the following reasons.
(93) First, the Commission notes that there are regulatory obligations applying to the
       wholesale mobile call termination markets. 47 Those regulatory obligations include
       access to specific network facilities, transparency (including publication of draft
       interconnection agreements on the network operator’s website), non-discrimination
       and price control. Furthermore, as established by Article 75 of the European
       Electronic Communications Code, by 31 December 2020 the Commission shall adopt
       a delegated act setting the Eurorates (a single Union-wide mobile and a single Union-
       wide fixed termination rate). That means that termination rates, currently established
       by the Bulgarian, the Slovenian and the Croatian regulators, will be set by the
       European Commission through a delegated act.
(94) Second, the Commission notes that the majority of the respondents to the market
       investigation did not raise any concerns related to vertical issues arising from the
       Transaction in the market for wholesale mobile call termination services on the one
       hand, and the retail supply of fixed telephony services and retail mobile
       telecommunications services on the other hand.48
(95) Therefore, due to the existing regulatory obligations on wholesale suppliers of mobile
       call termination services, the Commission considers that the merged entity will not
       have the ability to discriminate against United Group’s competitors in Slovenia and
       Croatia for access to call termination services in Bulgaria. Similary, United Group
       will not have the ability to discriminate against BTC’s competitors in Bulgaria for
       access to call termination in Slovenia and Croatia. In view of such regulatory
       obligations, the Commission also considers that the merged entity will also not have
       the ability to otherwise degrade terms and conditions for the provision of wholesale
       mobile call termination services.
(96) In view of the limited importance of (i) wholesale mobile call termination services in
       Croatia and Slovenia to BTC to and its competitors and (ii) wholesale mobile
       termination services in Bulgaria to Tele2 and Telemach and their competitors, the
46  Reply to RFI 8 of 1 April 2020.
47 With respect to Bulgaria, see Commission Decision of 21 November, 2016 in case BG/2016/1924, Call
    termination on individual mobile telephone networks in Bulgaria and corresponding national market
    review performed by the national regulatory authority. With respect to Croatia, see Commission Decision
    of 13 February 2019 in case HR/2019/2140: Wholesale voice call termination on individual mobile
    networks in Croatia. With respect to Slovenia, see Commission decision of 8 March 2016, in case
    SI/2016/1841: Wholesale voice call termination on individual mobile networks in Slovenia – Remedies.
48 See replies to questionanaire Q1 – Questionnaire to competitors, questions 4.1, 4.2 and 4.4 and replies to
    questionnaire Q2 – Questionnaire to customers, questions 7.1 and 7.2.
                                                        19
 ---pagebreak---       Commission considers that the merged entity will not have an incentive to
      discriminate or otherwise degrade terms and conditions for the provision of such
      services.
(97) The Transaction will thus not have any appreciable negative impact on prices or other
      terms or conditions in the downstream markets for the retail supply of fixed telephony
      services and the retail supply of mobile telecommunications services in those
      countries.
(98) Based on the above, the Commission concludes that the Transaction does not give rise
      to serious doubts as to its compatibility with the internal market in relation to the
      vertical link between the upstream markets for wholesale mobile call termination
      services and the downstream markets for retail supply of fixed telephony services and
      retail mobile telecommunications services.
        5.4.3.2. Wholesale market for fixed call termination services – Retail market for
                   fixed telephony services and retail market for mobile telecommunications
                   services
(99) United Group is active in the market for wholesale fixed call termination services on
      its own network in Slovenia. BTC is also active in this market in Bulgaria.
                       5.4.3.2.1.   The Notifying Party's view
(100) The Notifying Party submits that the Transaction will not result in any
      anticompetitive foreclosure concerns for the reasons set out below.
(101) First, the markets for provision of wholesale fixed call termination services are
      subject to ex ante regulation in the Member States. Such national regulations ensure
      that access to call termination is granted on reasonable conditions and rates remain
      reasonable and non discriminatory. In addition, following the adoption of the
      respective delegated act, by 31 December 2020, mobile and fixed termination rates
      will no longer be established by the national regulators, but by the Commission
      through a delegated act.
(102) Second, the Notifying Party asserts that in essence, that any attempt by the Parties to
      foreclose each other’s competitors is unlikely to be effective, since neither BTC nor
      United Group can influence the cost structure of Telemach/Tele2 and BTC
      competitors, respectively, in a significant manner.49 The Notifying Party submits in
      that respect that wholesale call termination in Croatia and Slovenia is only of minor
      importance to BTC and its competitors. Similarly, according to the Notifying Party,
      wholesale call termination in Bulgaria is only of minor importance to Tele2 and
      Telemach and their competitors in Slovenia and Croatia. In addition, in the vast
      majority of cases, the identity of the customer purchasing termination services is not
      known because international calls are mostly made over international carriers who act
      as intermediaries between the telecommunication operators.50
49  Form CO, paragraphs 247 and 255.
50  Reply to RFI 8 of 1 April 2020.
                                                   20
 ---pagebreak---                        5.4.3.2.2. The Commission's assessment
(103) The Commission considers that the Transaction does not give rise to serious doubts as
      to its compatibility with the internal market in relation to the vertical link between the
      upstream market for wholesale fixed call termination services and the downstream
      markets for retail supply of fixed telephony services and retail supply of mobile
      telecommunication services, for the following reasons.
(104) First, the Commission notes that there are regulatory obligations applying to the
      wholesale mobile call termination markets. 51 Those regulatory obligations include
      access to specific network facilities, transparency (including publication of draft
      interconnection agreements on the network operator’s website), non-discrimination
      and price control. Furthermore, as established by Article 75 of the European
      Electronic Communications Code, by 31 December 2020 the Commission shall adopt
      a delegated act setting the Eurorates (a single Union-wide mobile and a single Union-
      wide fixed termination rate). That means that termination rates, currently established
      by the Bulgarian and the Slovenian regulators, will be set by the European
      Commission through a delegated act.
(105) Second, the Commission notes that the majority of the respondents to the market
      investigation did not raise any concerns related to vertical issues arising from the
      Transaction in the market for wholesale fixed call termination services on the one
      hand, and the retail supply of fixed telephony services and retail mobile
      telecommunications services on the other hand.52
(106) Therefore, due to the existing regulatory obligations on wholesale suppliers of fixed
      call termination services, the Commission considers that the merged entity would not
      have the ability to discriminate against United Group’s competitors in Slovenia for
      access to call termination services in Bulgaria. Similary, United Group would not
      have the ability to discriminate against BTC’s competitors in Bulgaria for access to
      call termination in Slovenia. In view of such regulatory obligations, the Commission
      also considers that the merged entity will also not have the ability to otherwise
      degrade terms and conditions for the provision of wholesale fixed call termination
      services.
(107) In view of the limited importance of (i) wholesale fixed call termination services in
      Croatia and Slovenia to BTC to and its competitors and (ii) wholesale fixed
      termination services in Bulgaria to Tele2 and Telemach and their competitors, the
      Commission considers that the merged entity will not have an incentive to
      discriminate or otherwise degrade terms and conditions for the provision of such
      services.
51 With respect to Bulgaria, see Commission Decision of 26 May, 2016 in case BG/2016/1862, Call
   termination on individual public telephone provided at a fixed location in Bulgaria. With respect to
   Croatia, see Commission Decision of 12 February 2019 in case HR/2019/2139: Wholesale call
   termination on individual public telephone networks provided at a fixed location in Croatia. With respect
   to Slovenia see Commission Decision of 7 March 2016, in case SI/2016/1840, Wholesale call termination
   on individual public telephone networks provided at a fixed location in Slovenia – Remedies.
52 See replies to questionanaire Q1 – Questionnaire to competitors, questions 4.1, 4.2. and 4.5 and replies to
   questionnaire Q2 – Questionnaire to customers, questions 7.1 and 7.2
                                                        21
 ---pagebreak--- (108) The Transaction will thus not have any appreciable negative impact on prices or
      other terms or conditions in the downstream markets for the retail supply of fixed
      telephony services (and all possible sub-segments set out at paragraph (30)) and the
      retail supply of mobile telecommunications services (and all possible sub-segments
      set out at paragraph (23)) in those countries.
(109) Based on the above, the Commission concludes that the Transaction does not give rise
      to serious doubts as to its compatibility with the internal market in relation to the
      vertical link between the upstream market for wholesale mobile call termination
      services and the downstream markets for retail supply of fixed telephony services and
      retail mobile telecommunications services.
6.     CONCLUSION
(110) For the above reasons, the European Commission has decided not to oppose the
      notified operation and to declare it compatible with the internal market and with the
      EEA Agreement. This decision is adopted in application of Article 6(1)(b) of the
      Merger Regulation and Article 57 of the EEA Agreement.
                                                     For the Commission
                                                     (Signed)
                                                     Margrethe VESTAGER
                                                     Member of the Commission
                                                  22