CELEX: 31996M0689
Language: en
Date: 1996-02-29 00:00:00
Title: Commission Decision of 29/02/1996 declaring a concentration to be compatible with the common market (Case No IV/M.689 - ADSB / Belgacom) according to Council Regulation (EEC) No 4064/89 (Only the English text is authentic)

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31996M0689

Commission Decision of 29/02/1996 declaring a concentration to be compatible with the common market (Case No IV/M.689 - ADSB / Belgacom) according to Council Regulation (EEC) No 4064/89 (Only the English text is authentic)  

Official Journal C 194 , 05/07/1996 P. 0004

 COMMISSION DECISION of 29/02/1996 declaring a concentration to be  compatible with the common market (Case No IV/M.689 - ADSB / Belgacom)  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. PULIC VERSION MERGER PROCEDURE ARTICLE 6(1)B DECISION To the notifying parties Dear Sirs, Subject :<ind> Case No IV/M.689  ADSB/Belgacom <ind> <ind> Notification of a concentration pursuant to Article 4 of  Council Regulation No 4064/89 1.<ind> On 26 January 1996 the Commission received a notification on an  acquisition of a shareholding in Belgacom by a Consortium consisting of  Ameritech International, Inc. Tele Danmark A/S and Singapore  Telecommunications Limited (the Consortium) from the Belgian State. 2.<ind> After examination of the notification, the Commission has  concluded that the notified operation falls within the scope of Council  Regulation 4064/89 and does not raise serious doubts as to its  compatibility with the common market. I<ind> THE PARTIES 3.<ind> Belgacom is the principal provider of domestic and international  telephone services in Belgium. The Belgian State currently holds all of  the capital stock of Belgacom. 4.<ind> Ameritech International Inc. (Ameritech) is a wholly owned  subsidiary of Ameritech Corporation, a US corporation and one of the  largest fullservice communications companies in the world. Ameritech  International is the entity through which Ameritech Corporation conducts  its international activities and investments. 5.<ind> Tele Danmark A/S is the principal provider of domestic and  international telephone services in Denmark. 6.<ind> Singapore Telecommunications Limited (Singapore Telecom) is the  principal provider of domestic and international telephone services in  Singapore. It also provides postal services. II<ind> THE OPERATION 7.<ind> On 21 December 1995, a Stock Purchase Agreement was signed between  on the one hand, the Belgian State and, on the other hand, the consortium  consisting of Ameritech, Tele Danmark and Singapore Telecom (the  Consortium), pursuant to which the Consortium will acquire 50% minus one  share of the capital stock of Belgacom  from the Belgian State.  The  members of the Consortium will acquire the Belgacom shares through a  special purpose vehicle company: ADSBTelecommunications B.V. (ADSB). ADSB  is a private limited liability company incorporated in the Netherlands  which is jointly owned by the members of the Consortium. III<ind> CONCENTRATION <ind> JOINT CONTROL <ind> (a)<ind> ADSB 8.<ind> The members of the Consortium currently own shares in ADSB as  follows: <ind> <ind> Ameritech <ind> 40% <ind> <ind> Tele Danmark <ind> 33% <ind> <ind> Singapore Telecom <ind> 27% 9.<ind> A Belgian financial partner may be invited to invest up to 5% of  the share capital of ADSB which would be subtracted from the Ameritech  shareholding.  [Deleted business secrets]. 10.<ind> At the shareholder level of ADSB, 95% of the votes are needed for  certain matters [...].  At board level, [...].  Each shareholder must have  one representative present for the meeting to constitute a quorum and the  board member(s) representing each parent exercise the voting rights in  proportion to the shareholdings of that parent.  A [ more than 75%]  majority of the shares is required for matters relating to the adoption or  amendment of the Business Plan and Budget and to decisions relating to  voting behaviour at Belgacom's shareholders meetings. 11.<ind> Accordingly, Ameritech, Tele Danmark and Singapore Telecom will  have joint control over ADSB. <ind> (b)<ind> Belgacom 12.<ind> The Belgacom shareholders' agreement (Article 3) provides that  shares of Belgacom will be divided into three classes. Class A will  include all shares owned by the State or public institutions, Class B  shares will be owned by ADSB, and Class C will include shares which could  come to be held by persons or entities other than those already mentioned  [...]. These C shares would not have voting rights.  13.<ind> Belgian company law requires a majority of 75% within each class  for a number of matters including the increase or reduction of the share  capital or the approval of a merger or splitup and 80% for other issues  including the redemption of own shares or the change of the corporate  object.  The shareholders' agreement requires that the disposition of  earnings and profits must be approved by a majority of votes in both Class  A and Class B as long as [...]. 14.<ind> The management of Belgacom will be conducted by the Board of  Directors. The Belgacom Board of Directors will consist of eighteen  members, nine of which will be appointed by Belgian State (through Royal  Decree) and the other nine by the Consortium Members. The chairman of the  Board will be appointed from among the directors appointed by the Belgian  State. He will have a casting vote. However, all decisions relating to the  strategic commercial behaviour of Belgacom including the adoption or  amendment of the Business Plan and of the Budget, any delegation of  management powers, strategic acquisitions or alliances, the appointment or  removal of Belgacom's Chief Executive Officer, will require a majority of  two-thirds or more of the votes cast at Board meetings. In addition, these  strategic decisions will demand a quorum of at least two directors  representing Class A and two directors representing Class B. 15.<ind> Class C shareholders would be entitled to board representation  when their shareholding reached 5%.  Even if these shareholders had board  representation there are several factors which indicate that the structure  of the various shareholdings will continue to ensure that ADSB and the  Belgian State will hold joint control for the foreseeable future.  Belgian  law requires the Belgian State to hold at least 50% plus one share of the  capital stock of Belgacom.  [...]. 16.<ind> The executive management of Belgacom lies with the Chief  Executive Officer (CEO) assisted by one or two deputies who will together  form the Executive Office. The CEO is formally appointed and removed by a  Royal Decree which is taken in accordance with the proposal of the Board  of Directors, which requires a majority of at least twothirds of the votes  cast. 17.<ind> In the light of the above information and the Commission notice  on undertakings concerned [OJ C 385 of 31.12.94 paragraph 29], Ameritech,  Tele Danmark and Singapore Telecom, through ADSB, have joint control over  Belgacom with the Belgian State. <ind> FULL FUNCTION AUTONOMOUS ECONOMIC ENTITY 18.<ind> Belgacom has been operational as the Belgian national  telecommunications provider for a considerable period.  Its net cash flow  of Belgacom in 1994 amounted to 1,351 million BF and at the end of 1994 it  employed about 27,000 staff. 19.<ind> According to Article 11 of Exhibit M to the Stock Purchase  Agreement dated 21 December 1995 the parties to the Joint Venture have  entered into the Agreement for a term of thirty years which will be  automatically renewable for two successive terms of ten years.  In  addition, as stated above, the Belgian Government is required by law to  hold at least 50% plus one share of the stock of Belgacom and [...]. 20.<ind> Accordingly, Belgacom will perform as a Joint Venture on a  lasting basis, all the functions of an autonomous economic entity, on  grounds of disposal of assets, staff and financial independence, in the  field of the provision of telecommunication services. <ind> ABSENCE OF SCOPE FOR COORDINATION OF COMPETITIVE BEHAVIOUR 21.<ind> The Belgian State is not active in telecommunications other than  through Belgacom.  Accordingly, the likelihood of coordination must be  measured between the members of the Consortium. 22.<ind> The parent companies are potential competitors to Belgacom  following the liberalisation of telecommunications and services in  Belgium.  It is unlikely that the parent companies would enter the market  following the substantial investment which they have made in acquiring the  stake in Belgacom.  Even if they were to offer services in Belgium  following liberalisation, the number and strength of the other potential  competitors in Belgium would make any cooperative behaviour insignificant.   This is confirmed by the noncompete clause in which the Consortium members  have undertaken not to compete with Belgacom directly or indirectly in the  provision of telecommunications and related services offered in Belgium.   Limited exceptions apply for activities which account for less than 0.5%  of Belgacom's revenues in any one year, for the publication of industrial  directories by Ameritech (through Wer Liefert Was?) and for electronic  commerce services through GEIS. 23.<ind> With the exception of those services which are offered by  Belgacom on a national basis (and where the Consortium members have agreed  not to compete with Belgacom), most remaining services have geographical  market definitions which have been considered to be at least European  wide.  These services include certain data communications services,  cellular telephone services, certain non cellular mobile activities and  certain value added services (as set out in the market definition section  V below). 24.<ind> Tele Danmark's international activities (which account for under  2% of its turnover) include paging services and Telenordia, a joint  venture in Sweden with BT and Telenor, which offers communications  services to companies in Sweden.  Ameritech currently has activities in  the EU for industrial directories (primarily in Germany but also with  turnover in neighbouring countries) and certain activities through GEIS  for electronic commerce services on an European basis.  Singapore Telecom  has EU activities in the UK and Sweden through cable TV operations.  There  is no overlap between Tele Danmark and Singapore Telecom's activities in  Sweden and the Ameritech activities in Belgium are of such a limited  extent that there is no likelihood of significant coordination. 25.<ind> As liberalisation takes place across the EU, the opportunities  for new entrants to enter telecommunications markets on an EU wide basis  will increase.  Even though all of the Consortium members will be  potential competitors on these markets; and that they have activities  already in the EU/EEA; the potential restriction of competition will not  have a significant effect on competition given the number and strength of  existing and potential competitors on this market.  For those services  which have worldwide market definitions, the absence of any  anticompetitive effect is even stronger, given the relative absence of  economic power of the parties against the competition which they do or  will face. 26.<ind> In the light of the above information, there is no likelihood of  coordination amongst Ameritech, Tele Danmark and Singapore Telecom or  between them and the Belgian State through Belgacom. 27.<ind> Accordingly, the notified operation is a concentration. IV<ind> COMMUNITY DIMENSION 28.<ind> The undertakings concerned have a combined aggregate worldwide  turnover in excess of 5,000 million ECU (Belgacom: 2,951million ECU,  Ameritech Corporation: 10,747 million ECU, Tele Danmark: 2,366 million  ECU, Singapore Telecom: 1,927 million ECU), following their latest reports  and accounts.  At least two undertakings concerned have a communitywide  turnover of more than ECU 250 million (Belgacom: [more than 250 million  ECU], Tele Danmark: [...])).  The undertakings concerned do not achieve  more than twothirds of their aggregate Communitywide turnover within one  and the same member State.  Therefore, the operation has a Community  dimension. V<ind> COMPATIBILITY WITH THE COMMON MARKET <ind> A<ind> RELEVANT PRODUCT MARKETS 29.<ind> The relevant product market in this operation are a wide range of  telecommunications and related services. <ind> According to the notifying parties, Belgacom operates in the  following product areas. <tab> <ind> Local telephone services (PSTN and ISDN) <tab> <ind> Domestic long distance telephone services <tab> <ind> International telephone services (inc.VPN) <tab> <ind> Leased lines <tab> <ind> Data communication services (inc. MAN&LAN, Telex, Telegraph,  EDI) <tab> <ind> Cellular telephone activities <tab> <ind> Noncellular mobile activities (paging, calling card, pay  phones, maritime radio services) <tab> <ind> Value added services (inc.centrex,operator services) <tab> <ind> Supply and service of CPE <tab> <ind> Telephone directories publishing <tab> <ind> Telephone directories data <tab> <ind> Telecommunication and engineering consulting 30.<ind> However, a precise product market definition is not necessary as,  given the respective market positions of the parties in the sectors  referred to above or even in separate narrower markets, such a definition  would not alter the Commission's conclusion with regard to dominance in  this case described under Assessment below. <ind> B<ind> RELEVANT GEOGRAPHIC MARKETS 31.<ind> Basic services related mainly to reserved services in Belgium  (e.g. fixed national and international voice, leased lines, telex) have  traditionally been considered as a national geographic market due to the  still prevailing regulations and the role of the national  telecommunications operators. 32.<ind> The geographic market for certain value added services is  generally considered as at least European and possibly worldwide.  In any  case the markets for telecommunications services are evolving very rapidly  as a result of technical change and liberalisation of the regulatory  environment. 33.<ind> However, given that the operation does not result in any problem  of dominance in the EU/EEA area, for the reasons exposed in the assessment  below, it is not necessary to define the relevant geographic market in the  present case. <ind> C<ind> ASSESSMENT  <ind> Belgium 34.<ind> The market behaviour of telecommunications operators in Belgium  is controlled by regulatory mechanisms which are being put into place.  A  telecommunications regulatory authority is already in existence and  legislation which will provide some of the conditions necessary for  competition is in place.  Further measures are envisaged, and will be  necessary, in order for the proper competitive conditions to exist for new  entrants to compete effectively with Belgacom on the markets in which it  currently has a monopoly. 35.<ind> Belgacom holds very high market shares (including 100% for some  services). Following the operation, it appears that this position will not  change until liberalisation of services and infrastructure becomes  effective in Belgium.  In European and worldwide markets, Belgacom should  become a stronger competitor following the operation and will be able to  take advantage of the liberalised telecommunications markets in most of  the EU which should take place by the beginning of 1998.  Belgacom will  compete on those European markets with strong competitors such as BT,  Unisource, Deutsche Telekom and France Telecom.  However, in the short  term, the possibility exists that Belgacom may undergo a financial and  technical strengthening without having to face actual competition on the  markets for its currently non liberalisedactivities. 36.<ind> In the light of information provided by the notifying parties,  the products in which Belgacom has [close to 100%] of sales in Belgium  comprise:  local and domestic long distance telephone services,  international telephone services, leased lines, value added services and  telephone directories data.  It has in excess of [at least 90%] of sales  in Belgium for data communication services, cellular telephone services,  non cellular mobile services, payphone services and paging services and  [between 30% and 40%] for the publishing of telephone directories and  [between 35% and 45%] in the telecommunications and engineering consulting  sector. Also, Belgacom was responsible for [between 50% and 70%] of the  supply and service of Customer Premises Equipment in Belgium in 1995. <ind> There are only two very limited areas of overlap between any of the  Consortium members and Belgacom in Belgium.  These are a limited number of  sales of industrial directories by a German subsidiary (Wer Liefert Was?)  of Ameritech into Belgium and the activities of GE Information Services  (GEIS) in which Ameritech has an interest, which offers electronic  commerce services throughout Europe, including, to a limited extent,  Belgium.  Neither of these activities, combined with those of Belgacom,  give rise to the creation or strengthening of a dominant position.  This  is because, as far as directories are concerned, the addition of market  shares is insignificant and with regard to electronic commerce services  there is no direct overlap between Ameritech and Belgacom.  The issue of  potential competition is covered in paragraph 22 above. 37.<ind> There are no overlapping activities of any significance in  Belgium between different Consortium members. Ameritech, Tele Danmark and  Singapore Telecom conduct the bulk of their operations in their respective  home territories.  38.<ind> Accordingly, in the light of the above information, there is no  creation or strengthening of a dominant position in Belgium within the  meaning of Article 2 of the Merger Regulation. <ind> Outside Belgium   39.<ind> Belgacom is active only in Europe.  Apart from its activities in  Belgium, it has the limited interests in Russia as described above.   Ameritech, Tele Danmark and Singapore Telecom also have activities in the  EU/EEA as set out above.  This operation involves no addition of market  shares in those countries. <ind> For the services which have a market definition which is Europe or  even world wide, the combined market shares of Belgacom and Tele Danmark  in Europe and Belgacom and all the consortium members on world wide  markets, the transaction does not raise any competition problems. <ind> Conclusion <ind> In the light of the above information, the notified operation does  not raise serious doubts as to its compatibility with the common market. VI<ind> ANCILLARY RESTRAINTS 40.<ind> [...] the Consortium members undertake not to compete with  Belgacom in the provision of telecommunications services and related  services in Belgium.  An exception is provided for operations which  represent less than 0.5% of Belgacom's revenues for the publication of  directories by Ameritech and for electronic commerce services provided  through GEIS.  Ameritech has given a similar non compete undertaking for  it and its controlled affiliates. This clause is a normal consequence of  the parent companies' investment in the joint venture and reflects the  parent companies' withdrawal as potential competitors in the Belgian  market.  Insofar as this is a restriction of competition, this provision  is directly related and necessary to the implementation of the  concentration. For the above reasons, the Commission has decided not to oppose the  notified operation and to declare it compatible with the common market and  with the functioning of the EEA Agreement. This decision is adopted in  application of Article 6(1)(b) of Council Regulation No 4064/89. <tab> For the Commission,