CELEX: 31995M0604
Language: en
Date: 1995-09-15 00:00:00
Title: COMMISSION DECISION of 15/09/1995 declaring a concentration to be compatible with the common market (Case No IV/M.604 - Albacom ) according to Council Regulation (EEC) No 4064/89 (Only the English text is authentic)

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31995M0604

COMMISSION DECISION of 15/09/1995 declaring a concentration to be compatible with the common market (Case No IV/M.604 - Albacom ) according to Council Regulation (EEC) No 4064/89 (Only the English text is authentic)  

Official Journal C 278 , 24/10/1995 P. 0008

  COMMISSION DECISION of 15/09/1995 declaring a concentration  to be compatible with the common market (Case No IV/M.604 -  Albacom ) according to Council Regulation (EEC) No 4064/89   (Only the English text is authentic).   The paper version of the decision is available through the  sales offices of the Office of Official Publications of the  European Communities  PUBLIC VERSION  MERGER PROCEDURE  ARTICLE 6(1)(a) DECISION  To the notifying parties  Dear Sirs,  Subject:<ind> Case No IV/M.604  ALBACOM  <tab> <ind> Your notification of 11 August 1995 pursuant to  Article 4 of Council Regulation No. 4064/89  1.<ind> This operation concerns the creation of a company  which will combine the telecommunications activities of  British Telecommunications plc (BT) and Banca Nazionale del  Lavoro SpA (BNL) in Italy. The new company  to be called  ALBACOM SpA  will initially offer business communication  services based on the two companies' existing networks and  will expand their activities to offer other types of  telecommunications services as the Italian market is  liberalized.  2.<ind> After examination of the notification, the  Commission has concluded that the notified operation  involves the acquisition of sole control by BT of a new  joint venture company which incorporates certain assets of  BNL. The operation does not fall within the scope of  application of Council Regulation 4064/89.  I.<ind> THE PARTIES  3.<ind> BT's principal activity is the supply of  telecommunications services and equipment. Its main services  are local and longdistance telephone calls in the UK, the  provision of telephone exchange lines to homes and  businesses, international telephone calls made from and to  the UK and the supply of telecommunications equipment for  customers' premises. BT and MCI Communications Corporation  (MCI) are partners in the "Concert" joint venture, for the  provision of advanced business telecom services to  multinational companies [Case No. IV/M.353  British Telecom  / MCI, of 13 September 1993 and Case No. IV/34.857 BTMCI, of  27 July 1994.].  4.<ind> BNL is one of Italy's largest banks with a total  turnover of about 2,5 billion Ecu. BNL's subsidiary   Multiservizi  has an exclusive private (X25, 100 nodes)  telecommunications network. Multiservizi also operates BNL's  primary data network. Multiservizi's telecommunications  activities are offered to third parties as well as BNL. The  Italian Treasury holds a stake of about 73% in BNL.  II.<ind> THE OPERATION  5.<ind> The operation is the creation of ALBACOM as a new  business telecommunications operator in Italy. BNL will  contribute Multiservizi and the other telecommunications  activities in which BNL is engaged. BT will contribute the  activities of BT Italy relating to its network business  within Italy but not its international correspondent  business. ALBACOM will immediately acquire the BT Italy GNS  and the Multiservizi TDM networks. The Multiservizi X25  network will be leased initially to ALBACOM, in order to  comply with [Deleted; business secret.], and it is planned  that that network will be automatically transferred to  ALBACOM after five years. In any event, Multiservizi will  not be able to sell capacity on the network.  III.<ind> CONTROL  6.<ind> The parties' shareholdings in ALBACOM will be split  50.5% BT and 49.5% BNL. At board level, BT is expected to  have four members to BNL's three. Therefore at both  shareholder and board level, BT will have an inbuilt  majority of issues where no minority right provisions  apply.  7.<ind> BNL retains certain joint rights, some of which are  on a permanent basis (or until BNL's shareholding falls  below 25%) and others of which are only applicable to the  first three years (the Development Phase) of ALBACOM's  operations. The permanent rights include the following:  <tab> <ind> approval of triennial reviews to the Business  Plan;  <tab> <ind> approval of annual updates to the initial  Business Plan and Business Plan where these entail funding  above the thresholds in the Initial Business Plan;  <tab> <ind> changes to the power or authority of the Chief  Executive Officer (CEO);  <tab> <ind> shareholder related contracts;  <tab> <ind> [Deleted; business secret.];  <tab> <ind> changes in the scope of the company and the  Articles of Association;  <tab> <ind> [Deleted; business secret.].  8.<ind> For the first three years only, BNL enjoys rights  also in the following areas:  <tab> <ind> appointment and dismissal of the CEO;  <tab> <ind> [Deleted; business secret.];  <tab> <ind> [Deleted; business secret.];  <tab> <ind> [Deleted; business secret.].  9.<ind> The areas in which a simple majority is sufficient  include the approval of the budget and longterm strategic  decisions within ALBACOM's original scope.  10.<ind> A Put Option exists for BNL [Deleted; business  secret.].  11.<ind> On a permanent basis, a Call Option gives BT the  right to acquire BNL´s shareholding [Deleted; business  secret.].  12.<ind> An Initial Business Plan has been agreed between BT  and BNL. This Business Plan covers the first ten years of  operation of ALBACOM. The Business Plan is updated annually  (with the joint rights listed above) and is subject to a  triennial review which is proposed [Deleted; business  secret.] to the shareholders meeting where BNL [Deleted;  business secret.].  13.<ind> In the Commission Notice on the notion of a  concentration, the relative importance of veto rights is  assessed in section 2.2. In general, the principal rights  which a minority shareholder should hold in order to be able  to exercise a decisive influence are the appointment of the  management and the determination of the budget (see  paragraph 25). Next in order of importance is the rights  over the business plan (paragraph 26). In the ALBACOM  shareholder's agreement, the appointment of the Chief  Executive Officer is subject to joint decision making during  the first three years and is by simple majority thereafter.  For the approval of the budget, a simple majority is  sufficient as BNL has no joint rights at any stage. By  contrast, BNL retains joint rights for both the triennial  review of the Business Plan and for the annual updates where  these involve major funding increases.  14.<ind> On the basis of the above information, it could be  argued that for the time of the Development Phase (3 years),  BNL has joint rights in relation to the Business Plan and to  the appointment/dismissal of the CEO and will therefore  exercise joint control over ALBACOM. After the completion of  the Development Phase, BNL's veto rights will be limited to  the updates and reviews of the Business Plan except of minor  funding increases where BT has a Call Option (see para. 15).  Thus, BT will subsequently not only control the budget and  longterm strategic decisions of the JV, but also the  appointment and dismissal of the CEO, i.e. the management of  ALBACOM.  15.<ind> In the light of the BS/BT case [Case No. IV/M.425   BS/BT of 28.03.1994.], the fact that after three years BT  will have the decisive influence over budget, management and  long term strategic decisions in the context of a ten years  business plan means that the operation should be assessed as  sole control by BT. In BS/BT, both BT and Banco Santander  were deemed to have joint control during the first three  years of the operation of the joint venture. Due to a  significant change in the consent rights of the parties and  a special Put Option of BS, BT was deemed to exercise a  decisive influence over the JV after three years.  16.<ind> In the present case, BNL will retain joint rights  after three years as to the updates of the Business Plan  including major funding increases. It is true that a veto  right over the business plan may be sufficient to confer  joint control even in the absence of any other veto right as  it is stated in paragraph 26 of the Commission Notice on the  notion of a concentration. However, the Business Plan of  ALBACOM is in particularly close relation with the budget of  the joint venture. According to section 1.11 of the Business  Plan, the annual budget will be established on a monthly  basis, allowing for variance analysis and updates on actual  figures to be submitted to the Board on a monthly basis.  Through the continuous control over the budget, BT will thus  have a considerable influence on the regular updates of the  Business Plan itself.  17.<ind> In addition, BNL will from year 4 onwards lose the  right to veto changes to the [Deleted; business secret.]. A  part of the Business Plan which is of importance for the  activities of ALBACOM will thus be solely controled by BT  after completion of the Development Phase.  18.<ind> Finally and as opposed to the BS/BT case, the  options, which are granted to the parent companies under the  Shareholders Agreement, are not appropriate to give decisive  influence in one wayor the other. The BNL Put Option  [Deleted; business secret.] which can only be exercised in  narrowly defined circumstances. Consequently, the Put Option  cannot act as any sort of deterrent to BT to act in a way  that takes account of BNL's views more than if it did not  exist. This is equally true for the BT Call Option which can  only be exercised [Deleted; business secret.].  <ind>   19.<ind> It would appear, therefore, that on the basis of  the traditional determinants of control, BNL may have joint  control for the first three years. It will however no longer  have control from year 4 onwards since it has no longer  decisive influence on the appointement of the managment and  the budget, which are (according to the Commission Notice on  the notion of a concentration) the most important veto  rights. As in the BS/BT case, the business plan covers a ten  year period and, according to the financial projections of  the parties, [Deleted; business secret.]. Given the long  term nature of this investment in the telecoms sector in  Italy, the three year period is insufficient to bring about  a lasting change with regard to the participation of BNL  (see also paragraph 38 of the Commission Notice on the  notion of a concentration). BT will therefore have sole  control over ALBACOM. Consequently, the operation is the  acquisition of control by BT of a new joint venture company  which incorporates certain assets of BNL. Therefore, for the  purposes of calculating turnover, Article 5(2) is  applicable.  IV. <ind> ABSENCE OF COMMUNITY DIMENSION  20.<ind> BT and the parts of BNL which are the subject of  the transaction have a combined worldwide turnover of more  than 5000 million ECU as BT alone had a worldwide turnover  of 17,905 million Ecu in the financial year 1994/95. BT has  a Community wide turnover of over 250 million ECU. The  assets of BNL acquired by BT are about 20 million Ecu and do  thus not have the Community wide turnover required by  Article 1 (2) b of Council Regulation 4064/89. Therefore,  the operation does not have a Community dimension.  V.<ind> CONCLUSION  21.<ind> Based on the above, the Commission has concluded  that the notified operation does not have a Community  dimension within the meaning of Article 1 of the Merger  Regulation and therefore does not fall within the scope of  the Merger Regulation. This decision is adopted in  application of Article 6(1)(a) of Council Regulation No  4064/89.  For the Commission,