CELEX: 32014M7307
Language: en
Date: 2014-10-24 00:00:00
Title: Commission Decision of 24/10/2014 declaring a concentration to be compatible with the common market (Case No COMP/M.7307 - ELECTRICITY SUPPLY BOARD / VODAFONE IRELAND / JV) according to Council Regulation (EC) No 139/2004 (Only the English text is authentic)

|[pic]                             |EUROPEAN COMMISSION                                                                                      |

                                       Brussels, 24.10.2014
                                       C(2014) 8058 final

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|To the notifying parties                                               |                                                                       |
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Dear Sir/Madam,

Subject:    Case M.7307 – Electricity Supply Board/ Vodafone Ireland/ JV
Commission decision pursuant to Article 6(1)(b) of Council Regulation No 139/2004[1]

    1) On 26 September 2014, the European Commission received a notification of a proposed concentration pursuant to  Article  4  of  the  Merger
       Regulation by which the undertakings the Electricity Supply Board ("ESB") and Vodafone Ireland Limited ("Vodafone", together with ESB, the
       "Parties") acquire within the meaning of Article 3(1)(b) of the Merger Regulation joint control of a newly created joint  venture  company
       (the "JV") by way of purchase of shares.

       THE PARTIES

    2) ESB is an electricity utility, principally active in the transmission, distribution, generation and supply  of  electricity.  ESB  is  95%
       owned by the Irish State.[2] ESB is the licensed owner of Ireland’s electricity transmission and distribution  systems.  ESB  also  has  a
       telecoms subsidiary called ESB Telecoms Limited ("ESBT"). It does not provide retail mobile telecommunications services  but  sells  trunk
       fibre services to other communication operators and retail end-to-end business connectivity services. It  also  leases  space,  mainly  on
       towers, to mobile communications operators.

    3) Vodafone is a wholly-owned subsidiary of Vodafone Group plc, a global communications company. In Ireland, Vodafone is  active  in  several
       wholesale  and  retail  markets  for  mobile  and  non-mobile  telecommunications.  In  particular,  Vodafone   provides   retail   mobile
       telecommunications services, retail fixed telephony and internet services, multiple-play services,[3] wholesale mobile services, wholesale
       leased lines and wholesale fixed internet connectivity.

       THE JOINT VENTURE

    4) In 2012, ESB initiated an open procurement process to select a joint venture partner with whom it would build a fibre network  that  would
       be rolled out along ESB's electricity distribution network. Ultimately, Vodafone was selected as partner for the joint  venture.  Vodafone
       and ESB concluded the Joint Venture Agreement (“JVA”) establishing the JV on 2 July 2014.

    5) Pursuant to the JVA, the Parties will jointly control the JV. ESB and Vodafone will each hold 50% of the JV's share capital and 50% of the
       voting rights in the JV. Representation on the board will be equal.[4] The chairmanship will rotate between ESB and  Vodafone  appointees,
       but the chairman will not carry a casting vote.

    6) The JV has been created to build and operate a high capacity fibre-to-the-building ("FTTB") network to homes  and  businesses  in  certain
       parts of Ireland. The FTTB network does not currently exist in Ireland. The  fibre  will  be  deployed  on  ESB's  existing  overhead  and
       underground infrastructure. For this purpose, ESB will grant the JV rights of access to its electricity distribution system in return  for
       a fee.

    7) The FTTB network is planned to cover [400 000-500 000] premises[5] in 50 towns  of  moderate  size  (i.e.  towns  with  more  than  4  000
       inhabitants) in Ireland in the first five years of the JV's operation ("Phase One"). The FTTB network is expected to offer speeds from 200
       Mbps to 1 000 Mbps (1 Gb).

    8) The Commission has assessed whether the creation of the JV constitutes a concentration within the meaning of  the  Merger  Regulation.  In
       accordance with Article 3, paragraph 4 of the Merger Regulation, this is the case if the JV will  perform  on  a  lasting  basis  all  the
       functions of an autonomous economic entity.

    9) The JV will have a management team dedicated to its day-to-day operations and will have access to sufficient resources including  finance,
       staff, and assets in order to conduct its business activities on a lasting basis. In particular, the JV will have […] direct employees and
       […] employees seconded from ESB.[6] The Parties have also committed to provide sufficient funding until the JV  becomes  self-funding.  In
       particular, in the JVA, Vodafone has committed to invest approximately EUR […] in the JV by way of a share subscription.

   10) Moreover, the JV's activities will extend beyond any one specific function within the parent companies’ business activities. The  JV  will
       be involved in the planning, design, procurement, deployment, operation and, ultimately, the  commercial  performance  of  a  fixed  fibre
       access network. Neither ESB nor Vodafone are engaged in those activities.

   11) In addition, the Parties intention is that the JV will play an active role on the market. In particular, the Parties submit  that  the  JV
       will offer wholesale access to the FTTB network on a commercial, open and non-discriminatory basis. While the majority of the  JV's  sales
       are expected to be made to Vodafone, these sales will be concluded at arm's length. To ensure this is the case, […].[7] The JV  will  also
       actively seek third party wholesale customers. In line with this, the JV is projected to make […]% of its sales to third parties  in  year
       two and approximately […]% in years three, four and five. The Commission has tested whether these projections are realistic by  contacting
       the third parties that the Parties had listed as potential customers. Based on  the  feedback  of  these  third  parties,  the  Commission
       considers that the JV's projections relating to third party sales are reasonable.

   12) Furthermore, several additional elements indicate that the JV is likely to play an active role on the  market.  First,  the  JV  has  been
       conceived from the start as an entity that will sell wholesale access to its network to several market players rather than  one.  This  is
       evident from, among other things, the procurement notice by which ESB sought a partner for the JV  and  which  mentions  an  "open  access
       model". It is also confirmed by the fact that Parties have publicly announced that the JV will give access to its network on an open, non-
       discriminatory basis to all parties. The JVA moreover specifies that the business of the JV will be to develop a wholesale market and sell
       services to both the JV's shareholders and third party customers. Second, the FTTB network of the JV is likely to  have  sufficient  extra
       capacity to serve both Vodafone and third parties. Third, the JV will offer a valuable product, namely a network with speeds of  up  to  1
       Gb, which is likely to be attractive to third parties.

   13) Based on the above, the Commission concludes that the JV will perform on a lasting basis all  the  functions  of  an  autonomous  economic
       entity and is therefore considered a concentration.

       UNION DIMENSION

   14) The undertakings concerned have a combined aggregate worldwide turnover of more than EUR  5  000  million[8]  (ESB:  EUR  3  540  million;
       Vodafone: EUR 51 904 million). Each of them has an EU-wide turnover in excess of EUR 250 million (ESB: EUR […] million; Vodafone: EUR  […]
       million). ESB achieves more than two-thirds of its EU-wide turnover in Ireland but Vodafone does not. The notified operation therefore has
       a Union dimension.

       RELEVANT MARKETS

15) The JV will engage in two types of activities:

     a. The JV's primary activity will be to provide wholesale local network infrastructure access services to telecommunications operators. This
        will allow telecommunications operators to provide retail services including data, content and voice to householders and businesses.  The
        primary activity consists of two elements.

         i. The provision of wholesale local network infrastructure access services  by  means  of  wholesale  virtual  unbundled  local  access
            (“VULA”) products carried over its FTTB network, which in turn will support retail services to be  offered  by  the  JV's  wholesale
            customers to end users. The JV itself will not operate at the retail level.

        ii. The provision of wholesale local access through a higher quality, point-to-point dedicated bandwidth with higher levels of  customer
            care and speed.[9] The second element will include the so-called "Sites Business”: providing mobile operators with  connections  via
            the FTTB network from sites, that is to say sites housing their mobile communications equipment, to their backhaul  networks.  Fibre
            connection will improve the quality and capacity of their respective mobile networks.

            The difference between the first and the second element of the JV's primary activity is that, for the second element,  the  JV  will
            provide dedicated bandwidth with higher levels of customer care and speed, which is necessary  for  the  provision  of  services  to
            larger corporations and sites.

     b. The JV's secondary activity will consist of the provision of wholesale end-to-end connectivity solutions to communications operators.  It
        is envisaged that the JV's secondary activity will only be offered to smaller communications  operators  which  require  wholesale  local
        access but do not themselves have trunk capacity.[10] To provide this service, the JV will acquire trunk segments of  leased  lines  from
        providers to be re-sold to those communications operators as part of a package, together with access to the FTTB network.  The  secondary
        activity will only be  offered in conjunction with the primary activity (the provision of wholesale local network  infrastructure  access
        services via the FTTB network) and will be a relatively minor part of the JV's activity. It is described by the Parties as an enhancement
        of the primary activity of the JV.

   16) Based on the JV's activities and those of the Parties, the following markets are relevant markets for the assessment of this transaction.

1 Wholesale network access provided at a fixed location

1 Relevant product market

   17) Wholesale network access includes different types of access that allow telecommunications providers to offer services to end customers. It
       comprises notably physical access at a fixed location such as local loop unbundling and non-physical or virtual  network  access  such  as
       bitstream access at a fixed location.

   18) The Parties submit that, in addition to providing their own end-to-end infrastructure,[11]  internet  service  providers  offering  retail
       broadband internet access have two options to reach their retail customers: (i) building their network to the incumbent’s local  exchanges
       from where they rent passive copper local loops (local loop unbundling ("LLU")), and (ii) procurement of wholesale input in  the  form  of
       "bitstream".

   19) As a result, according to the Parties, there  are  two  related  wholesale  markets,  namely,  the  market  for  wholesale  local  network
       infrastructure access at a fixed location and the market for wholesale bitstream access.  The  Parties  submit  that  the  wholesale  VULA
       products to be provided by the JV fall within the first market. Therefore, in the Parties' view,  only  the  market  for  wholesale  local
       network infrastructure access at a fixed location is the relevant market for the purpose of the transaction.

   20) The Commission Recommendation on relevant markets,[12] which defines markets for the purpose of ex ante regulatory  intervention,  defines
       distinct markets for wholesale local access  at  a  fixed  location,  which  includes  LLU  as  well  as  virtual  products  that  exhibit
       functionalities equivalent or comparable to key features of physical unbundling, and for wholesale central access  at  a  fixed  location,
       which includes bitstream products with certain characteristics (respectively markets 3(a) and 3(b) of the Recommendation).

   21) The Irish Commission for Communications Regulation ("ComReg") stated, in its 2012 consultation  on  the  Next  Generation  Access  ("NGA")
       remedies,[13] that "for the initial roll out phase of NGA investment, VUA [virtual unbundled access] is akin to WBA  [wholesale  bitstream
       access] and should be mandated in Market 5, however this will be kept under review (…). Furthermore, it could be  envisaged  that  as  NGA
       roll out is realised, technology improvements augment and demand for VUA materialises; the dynamic of demand and supply side  substitution
       will become clearer". In its 2013 NGA Decision, ComReg maintained its position that wholesale virtual unbundled access products belong  to
       the same market as wholesale bitstream access products.[14] According  to  the  Parties,  this  assessment  was  primarily  based  on  the
       deployment of fibre-to-the-cabinet ("FTTC").

   22) In Carphone Warehouse/Tiscali UK,[15] the Commission considered whether the broadband access market  should  be  split  between  wholesale
       local access and wholesale bitstream access. The Commission stated that the market investigation  confirmed  that  there  are  significant
       differences in characteristics, price, performance and service between these different types of access products. Ultimately, however,  the
       market definition was left open.

   23) For the purposes of the present decision, the Commission concludes that the exact product market  definition  for  the  wholesale  network
       access provided at a fixed location can be left open as the proposed transaction does not raise serious doubts, regardless of the  product
       market definition.

2 Relevant geographic market

   24) The Parties submit that, in line with the analysis of ComReg, the geographic scope of the market for wholesale network access at  a  fixed
       location should is national. In its Market Review Decision on Wholesale (Physical) Network  Infrastructure  Access  ("WPNIA"),[16]  ComReg
       considered that there was insufficient evidence to justify delineation of sub-national markets, taking into account competition within the
       WPNIA market across Ireland. The Parties also point out that wholesale services will be uniformly priced on a national basis, and not on a
       local or regional basis.

   25) In previous cases,[17] the Commission considered whether the market for wholesale provision of broadband internet access  is  national  in
       scope or whether it  should  be  defined  narrower,  in  particular  taking  into  account  the  existing  regulatory  conditions  in  the
       telecommunications sector. In the end, the market definition was left open.

   26) The Commission considers that, in the present case, the exact definition of the geographic market  can  be  left  open,  as  the  proposed
       transaction does not raise serious doubts, regardless of the geographic market definition.

2 Retail mobile telecommunications services market

1 Relevant product market

   27) The retail mobile telecommunications market is the market on which mobile network operators and  mobile  virtual  network  operators  sell
       voice and data services to end customers via a mobile network.[18] Mobile telecommunications services to end  customers  include  services
       for national and international voice calls, SMS (including MMS and other messages), mobile internet data services and retail international
       roaming services.

   28) The Parties submit that there is an overall product market which is not further subdivided  by  type  of  customer  or  by  technology  or
       service. Hence, it is not appropriate to distinguish services type of customer, type of service or type of network technology.

   29) In Hutchison 3G Austria / Orange Austria,[19] the Commission considered the aforementioned segmentations, but  eventually  concluded  that
       there is a single market for the provision of mobile telecommunications services to end customers. More recently, in  Hutchison  3G  UK  /
       Telefónica Ireland,[20] the Commission also concluded that there is a  single  market  for  the  provision  of  mobile  telecommunications
       services to end customers and that there are no separate markets by types of customers (such as business and residential),  by  technology
       (such as 2G, 3G and 4G), by types of service (i.e. voice, mobile broadband and machine to machine), by types of contracts  (such  as  pre-
       paid and post-paid). [21]

   30) For the purpose of the present decision, the Commission concludes that the market for the provision of mobile telecommunications  services
       to end customers constitutes the relevant product market.

2 Relevant geographic market

   31) The Parties consider that the market for the provision of mobile telecommunications services to end  customers  should  be  considered  as
       national in scope.

   32) The Irish telecommunications regulator, ComReg, grants licenses for the territory of Ireland. Mobile  operators  sell,  market  and  price
       their services on a national level.

   33) In line with previous decisions,[22] the Commission concludes that the relevant geographic market corresponds to the territory of Ireland.

       3 Retail supply of fixed voice services

1 Relevant product market

   34) Fixed line telephony retail services comprise the provision of connection services or access (at a  fixed  location  or  address)  to  the
       public telephone network for the purpose of making and receiving calls and related services.[23]

   35) The Parties submits that there is a single market for the provision of fixed voice services. According to the Parties, there is no  reason
       to differentiate between business and residential customers, because most operators provide services to each of these  types  of  customer
       and types of call by means of a single suite of fixed line telephony services without additional investments. The Parties do not consider,
       however, fixed voice services to be substitutable with mobile voice services. Moreover, the Parties submit that managed VoIP services  may
       be substitutable with fixed-line telephony services. However, according to the Parties, the  exact  definition  of  the  relevant  product
       market for retail fixed-line telephony services can be left open as the Transaction does not raise any competition concerns under  any  of
       the alternative product market definitions.

   36) In Carphone Warehouse / Tiscali UK, the Commission considered that a distinction between local / national and international calls as  well
       as between residential and business customers may not be relevant.[24] In Vodafone / Kabel Deutschland, the  Commission  did  not  take  a
       definitive view with regard to these possible further segmentations of the retail fixed voice services market.  The  Commission  concluded
       however that traditional fixed voice services and managed VoIP services are interchangeable within a single market for the  retail  supply
       of fixed voice services.[25]

   37) In Vodafone / ONO,[26] the Commission found indications that VoIP services and fixed voice  services  provided  through  fixed  lines  are
       interchangeable, and also found indications that there is a distinction between residential and business customers. Ultimately, the market
       definition was left open.

   38) For the purpose of the present decision, the exact product market definition can be left open as the proposed transaction does  not  raise
       competition concerns under any possible market definition

2 Relevant geographic market

   39) The Parties submit that the market for the provision of fixed voice services to end customers is national in scope.

   40) In past decisions, the Commission considered that the retail market for the supply of fixed voice services was national in scope.[27]

   41) The Commission considers that a national market definition is also appropriate in this case.

4 Retail supply of fixed internet access services

1 Relevant product market

   42) Fixed internet access services consist of the provision of a fixed telecommunications link enabling customers to access the  internet  via
       narrowband ("dial-up") services or broadband services.

   43) The Parties recognize that the  market  for  the  retail  supply  of  fixed  internet  access  services  may  be  segmented  by  bandwidth
       (broadband/narrowband), by technology (DSL/cable/fibre/mobile broadband) and by customer types  (residential  and  small  businesses/large
       businesses).

   44) The Parties submit that given the high degree of demand side substitutability, local access through copper, DSL, cable or fibre  are  part
       of the same product market. Mobile broadband, by contrast, is part  of  a  separate  market  for  mobile  communication  services  to  end
       customers.

   45) In previous decisions, the Commission concluded that narrowband and broadband internet services belong  to  separate  markets.[28]  Mobile
       broadband was also considered to belong to a separate market, as it is more expensive and slower.[29] Furthermore, in Carphone Warehouse /
       Tiscali UK the Commission distinguished between (i) residential and small customers, and (ii) large  business  customers  based  on  their
       needs for internet services.

   46) For the purposes of the present case, the exact definition of the relevant product market for retail fixed internet access services can be
       left open as the proposed transaction does not raise serious doubts regardless of the product market definition.

2 Relevant geographic market

   47) The Parties consider the market for retail supply of fixed internet access services to be national in scope.

   48) In previous decisions,[30] the Commission decided that the scope of this market is national.

   49) The Commission considers that a national market definition is also appropriate in the present case.

       COMPETITIVE ASSESSMENT

1 Current network infrastructure in Ireland

   50) Currently there are two broadband or so-called "next generation access" ("NGA") networks in Ireland, one operated  by  Eircom,  the  Irish
       telecoms incumbent, and the other by UPC Ireland ("UPC"), a cable company. These networks have different characteristics compared  to  the
       planned JV's FTTB network in terms of their footprint and technology.

   51) Eircom is currently in the process of expanding the footprint of its fibre network to  cover  1.6  million  homes  and  businesses  across
       Ireland by 2016. According to Eircom, this will represent around 70% of addresses in Ireland. Eircom  has  committed  to  invest  EUR  400
       million for this project. Eircom's network is a FTTC network, where the connection from the cabinet to the building (the  so-called  "last
       mile") is copper-based. The network will be offering speeds of up to 100 Mbps.[31] Eircom has regulatory obligations to provide  wholesale
       access to its network based on the finding by ComReg that Eircom has significant market power.[32]

   52) Regarding the overlap with the FTTB network of the JV, following the announcement of the transaction, Eircom confirmed that all  50  towns
       to be served by the JV would also be covered by its fibre network.[33] The Parties expect that, although the majority of these  areas  can
       avail themselves of both networks, there will be some areas within those towns where only one  of  the  networks  will  be  available.[34]
       According to the Parties, the exact areas and subsequent overlap will not be known until the detailed design work of the FTTB business has
       been completed, and until Eircom has fully rolled out its network.

   53) The second NGA network in Ireland is operated by UPC. UPC has a cable network[35] in urban areas of Ireland. UPC's  cable  network  passes
       approximately 860 000 homes. UPC is not active  in  the  wholesale  provision  of  network  access  and  does  not  grant  access  to  its
       infrastructure to third parties. UPC uses its cable network to itself provide fixed phone, high-speed broadband and television services at
       the retail level. Its network offers speeds ranging from 120 Mbps to 500 Mbps.[36]

   54) The overlap between the FTTB network of the JV and the cable network of UPC is likely to be limited. This is because the  Parties  decided
       not to include areas covered by the UPC cable network.

2 General impact of the transaction

   55) The Commission notes that the transaction will result in the roll-out of a new fibre broadband network covering parts of  Ireland.  A  new
       entity – the JV – will offer wholesale network access, in addition to Eircom, the existing provider of wholesale network  access.  In  the
       areas not served by Eircom’s FTTC network or UPC’s cable network, the roll-out of  the  JV's  FTTB  network  will  make  high-speed  fixed
       broadband available where it was previously not. In the areas where the JV's FTTB network overlaps with Eircom's FTTC network, the JV will
       result in the presence of an alternative network, providing  increased  choice  for  telecommunications  operators  looking  to  use  that
       infrastructure to provide retail services. The FTTB network will be capable of providing significantly higher speeds (from 200 Mbps  to  1
       000 Mbps) than currently available on the market.[37]

   56) In submissions to the Commission, third parties have argued that  the  entry  of  the  JV  in  the  market  for  wholesale  local  network
       infrastructure access could lead to higher prices in the retail market because it would increase Eircom's costs and ultimately lead to  an
       increase of the regulated wholesale access prices. The Commission does not  consider  such  a  scenario  plausible.  Irrespective  of  any
       potential impact on Eircom's costs and any subsequent potential impact on regulatory access prices, the  Commission  considers  it  likely
       that the transaction will result in pro-competitive effects, since it will create a new infrastructure that offers higher speeds and  will
       lead to the entry of a new competitor, to the benefit of consumers. The Commission also does not consider it plausible that  the  creation
       of the JV would result in Eircom scaling back its roll-out plans. In fact, based on Eircom's press releases[38] and information  from  the
       Parties, Eircom decided to increase the footprint of its network after the JV was announced.

   57) In what follows, the Commission assesses whether the transaction may lead to anti-competitive effects and raise serious doubts as  to  the
       transaction's compatibility with the internal market.

3 Overview of horizontal and vertical relationships

   58) The transaction will not result in any affected markets due to horizontal relationships between the Parties and the JV. The  JV's  primary
       activity is the provision of wholesale local network infrastructure access services. Neither Vodafone nor ESB are active in  this  market.
       Hence, there is no horizontal overlap between the JV's primary activity and that of Vodafone or ESB.[39]

   59) Several vertical relationships exist between the Parties and the JV and some of  these  relationships  result  in  affected  markets.  The
       relevant vertical relationships between the Parties and the JV are presented in the table below. The table also shows the market shares of
       the Parties and the JV in each market.

Table 1: Overview of vertical relationships between the JV and the Parties

|JV's activities                                            |Parties' activities                                        |
|Wholesale local network infrastructure access              |Retail provision of fixed internet access                  |
|JV: not yet active; primary activity                       |Vodafone: 16.3%; ESB: 0%                                   |
|                                                           |                                                           |
|                                                           |                                                           |
|                                                           |Retail supply of fixed voice services                      |
|                                                           |Vodafone: 16% by revenue; 13.6% by subscribers; ESB: 0%    |
|                                                           |Retail mobile communication services to end customers      |
|                                                           |Vodafone: 44.2% by revenue; 38.9% by subscribers; ESB: 0%  |
|                                                           |Wholesale provision of call termination services on fixed  |
|                                                           |Vodafone networks                                          |
|                                                           |Vodafone: 100% ; ESB: 0%                                   |
|                                                           |Wholesale provision of mobile call termination services on |
|                                                           |Vodafone network                                           |
|                                                           |Vodafone: 100% ; ESB: 0%                                   |
|                                                           |Pan-European mobile communications services to             |
|                                                           |multi-national corporations                                |
|                                                           |Vodafone: [30-40]%; ESB: 0%                                |
|Provision of wholesale end-to-end connectivity solutions   |Wholesale leased lines                                     |
|JV: not yet active; secondary activity                     |Vodafone: <1%; ESB: not more than [10-20]%                 |

   60) These vertical relationships give rise to four affected markets. In particular, Vodafone has a market share above  30%  in  the  following
       markets, which are downstream to the JV's primary activity: (i) retail mobile telecommunications market, where Vodafone has a market share
       of 44.2% by revenue and 38.9% by subscribers, (ii) wholesale provision of call termination services  on  fixed  Vodafone  networks,  where
       Vodafone has a market share of 100%, (iii) wholesale provision of mobile call termination services on Vodafone network, where Vodafone has
       a market share of 100%, and (iv) the market  for  pan-European  mobile  communications  services  to  multi-national  corporations,  where
       Vodafone's market share has been estimated at [30-40]%. The latter three markets are not examined further in  this  decision,  given  that
       call termination is subject to ex ante regulation in Ireland, there appear to be a sufficient number of competitors in the market for pan-
       European mobile communications services to multi-national corporations, and no concerns have been expressed in relation to  these  markets
       during the market investigation.

   61) Consequently, in the following sections, the Commission examines only the vertically affected markets for retail mobile telecommunications
       and the wholesale local network infrastructure. In addition, third parties expressed  concerns  about  the  transaction's  impact  on  the
       markets for retail fixed telecommunications services (internet and voice). The Commission therefore also assessed the transaction's impact
       on those markets.

4 Vertical assessment

1 Input foreclosure by restricting access to the JV's network for competing providers of retail fixed voice and internet services

   62) A vertical relationship exists between the upstream market on which the JV provides wholesale access to a local network infrastructure and
       the downstream markets on which Vodafone provides fixed internet and voice services to  retail  customers.[40]  The  JV's  wholesale  VULA
       products are intended to be used as an input for the fixed retail services (broadband internet and voice) offered by  Vodafone  and  other
       operators.

   63) The above-mentioned vertical relationship does not give rise to any affected markets. In the upstream market,  the  JV  currently  has  no
       market share, as it is a new entrant. On the downstream markets, Vodafone has a market share of around 16% in both the market  for  retail
       provision of fixed internet access and the market for retail supply of fixed voice services.  However,  during  the  market  investigation
       third parties expressed concerns that the transaction would lead to input foreclosure since the JV may give access to  retail  competitors
       of Vodafone on unfavourable terms. In addition, if the market for the retail provision of fixed internet were to be divided by technology,
       Vodafone could have higher market shares in some markets and that market  could  therefore  be  an  affected  market.[41]  The  Commission
       therefore assessed whether the creation of the JV would lead to input foreclosure.

   64) The Commission considers that the transaction is unlikely to lead to input foreclosure for three reasons.

   65) First, the Commission notes that, in assessing the transaction's effects on competition, it has to compare the competitive conditions that
       would result from the transaction with the conditions that would have prevailed without the transaction. This means that  the  effects  of
       the creation of the JV have to be compared to the present situation where no FTTB network exists. Absent the transaction, there would only
       be one network in Ireland that provides wholesale local network access products, namely  Eircom's  FTTC  network  (see  sections  5.1  and
       5.2).[42] The transaction will result in the creation of a second network, namely the JV's FTTB network, and the entry of a  new  provider
       of fibre-based fixed communications services at the wholesale level. Hence, the transaction is likely to introduce additional  competition
       at the wholesale level.

   66) The Commission also considers it unlikely that the transaction will lead to anti-competitive effects at  the  retail  level,  meaning  the
       retail markets for fixed internet and voice telephony. In the areas where only the FTTB network will  be  present,  the  transaction  will
       introduce one or more new providers of fibre-based services. In the areas where the JV's FTTB network  overlaps  with  the  Eircom's  FTTC
       network, the transaction will result in an additional fibre-based product offered to consumers by Vodafone and other operators  purchasing
       wholesale access from the JV.[43]

   67) Second, the Commission is of the view that the JV seems unlikely to have the ability and incentive to engage in input foreclosure. The  JV
       has been conceived from the start as an entity that will sell wholesale access on an open and non-discriminatory basis, and has  confirmed
       this in various public statements. Moreover, for input foreclosure to be a concern, the vertically  integrated  firm  resulting  from  the
       merger (in this case the JV) must have a significant degree of market power in the upstream market.[44] The JV is a new entrant and it  is
       unlikely to have such degree of market power in the foreseeable future. At present, Eircom's fibre network  has a coverage  of  1  million
       premises[45] and it is scheduled to reach 1.6 million premises by the end of 2016. By contrast, the  JV's  network  will  only  reach  […]
       premises in 2016. In 2019, the fifth year of the JV's existence, its network will reach […] premises. This is still less than a third than
       the coverage of Eircom in 2016. In short, in the foreseeable future, Eircom's network will have a much wider coverage and will  be  rolled
       out ahead of the JV's network. This also means that Eircom can dedicate time and resources to improving the speed of  its  network,  while
       the JV will still be rolling out its network. For these reasons, it is unlikely that the JV  will have  the  requisite  degree  of  market
       power to be able to foreclose rivals of Vodafone.

   68) As regards the incentive of the JV to engage in input foreclosure, the Commission notes that Vodafone holds a relatively low (around  16%)
       market share in both the market for retail provision of fixed internet access and the market for retail supply of  fixed  voice  services.
       This makes it less likely that Vodafone expects to benefit from higher price levels downstream, since the base of sales on  which  it  can
       enjoy increased margins is not that large.

   69) Furthermore, ESB, as a JV partner not active on the retail telecommunications markets, is unlikely to have an incentive to limit wholesale
       sales to third parties and to favour Vodafone, given that this would limit the JV's profits.[46]

   70) Third, and in any event, any foreclosure strategy is unlikely to result in anti-competitive effects in the downstream  market.  Downstream
       providers of fixed internet and voice services are unlikely to be foreclosed. Eircom and UPC are vertically integrated  and  benefit  from
       access to their own respective FTTC and cable network, both of which cover a large part of the Irish population. Without prejudice to  the
       results of the next market review, other downstream operators are currently able to access the  FTTC  network  of  Eircom,  which  has  an
       obligation to provide access under regulated terms throughout Ireland.[47]

   71) While there will be some areas in which only the JV's FTTB network will be available, these areas are likely to cover a small part of  the
       Irish population. Therefore, it is unlikely that any potential input foreclosure by the JV in these areas would produce  negative  effects
       on the downstream retail fixed line markets (internet and voice), given their national scope.

   72) Based on the above, the Commission considers that the transaction will result in additional network competition in parts of Ireland and is
       unlikely to result in input foreclosure of downstream operators.

2 Input foreclosure by restricting mobile network operators' access to the JV's network

   73) There is only an indirect link between the market on which the JV will offer wholesale access to its network and  the  market  for  retail
       mobile telecommunications services. The link is as follows. The JV offers wholesale access to its FTTB network. The FTTB  network  can  be
       used by mobile network operators to connect their mobile sites with their backhaul network. These connections  are  one  of  the  elements
       making up the mobile networks of mobile network operators. These mobile networks are in turn used by mobile network operators  to  provide
       mobile telecommunications services to their customers.

   74) In their submissions to the Commission, third parties have argued that the JV could favour Vodafone when giving mobile  network  operators
       access to its FTTB network to connect mobile sites with their backhaul network. This would lead to a form of input foreclosure.

   75) The Commission considers that such input foreclosure is unlikely. The input – access to the JV's FTTB network  to  connect  sites  with  a
       backhaul network – is only one of the elements making up the mobile network with which mobile network operators provide services to  their
       customers. In addition, only a very limited part of all sites in Ireland will be able to rely on the JV's FTTB network. Of the  more  than
       […] sites in Ireland, only […] sites are located in the footprint of the FTTB network and of those […] sites only […] sites  could,  based
       on their location, potentially use the FTTB network. Of these […] sites, Vodafone has equipment on […] sites. All of these […]  sites  are
       shared, meaning the sites carry equipment not only of Vodafone but also of another mobile network operator. If Vodafone obtains access  to
       the FTTB network for one of its […] sites within the network's footprint, this will also benefit the other operator on the site.

   76) In view of this, the Commission considers that Vodafone could not successfully engage in input foreclosure by restricting  mobile  network
       operators' access to the JV's network.

5 Allegations of State aid

   77) In submissions to the Commission, third parties have suggested that the  creation  of  the  JV  also  raises  State  aid  questions.  More
       specifically, these third parties suggest that ESB, one of the parents of the JV, benefits from favourable financing conditions because it
       is a State-owned entity. In addition, they suggest that ESB's electricity network benefits from rights of way, permits and ducts which  it
       will be contributing to the JV. These assets may not have been valued at market prices when they were contributed to the JV.

   78) These allegations regarding State aid do not change the Commission's assessment. The Commission is not required to  conduct  a  State  aid
       procedure in connection with every concentration procedure, which must be completed within strict time-limits.[48] At the same  time,  the
       Commission cannot ignore the consequences of possible State aid to undertakings  on  the  maintenance  of  effective  competition  in  the
       relevant market.[49] In this case, the Commission has assessed the JV's market power on the basis of all available  facts,  including  the
       fact that the JV will benefit from assets that were contributed to it by ESB, such as the right  to  use  ESB's  electricity  distribution
       network. The Commission does not take position on whether the contribution of these assets constitutes State aid, but  it  has  taken  the
       contribution of these assets into account when conducting its assessment. Therefore, without prejudice to the  outcome  of  any  potential
       State aid assessment, the question whether ESB or the JV benefitted from State aid does not change  the  Commission's  assessment  of  the
       transaction.

       CONCLUSION

   79) 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.[50] This decision is adopted in application of Article 6(1)(b) of the Merger Regulation.

For the Commission
(Signed)
Joaquín ALMUNIA
Vice-President
-----------------------
[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]   The remaining 5% of the issued capital stock of ESB are held by an Employee Share Ownership Trust.

[3]   In Ireland Vodafone's multi-play offer at present comprises retail fixed telephony, residential mobile and broadband internet services but
no television services.

[4]   […]. According to the Parties, these provisions serve in particular to ensure that the JV sells its products on an open and non-
discriminatory basis (see paragraphs (11) and (69)).

[5]   […]. The press release issued by ESB at the time the JV was announced states that the JV's network will pass 500 000 premises.

[6]   ESB explained that the reason these employees will be seconded from ESB is to […].

[7]   […].

[8]   Turnover calculated in accordance with Article 5(1) of the Merger Regulation and the Commission Consolidated Jurisdictional Notice (OJ
C95, 16.04.2008, p. 1).

[9]   For example, a communications operator might seek access to such wholesale local access services in order to provide its customer with
business-to-business connectivity.

[10]  This wholesale end-to-end connectivity service will be used in turn by the communications operators to provide retail services to their
customers.

[11]  In Ireland, Eircom and UPC own copper and cable networks respectively.

[12]  European Commission's Recommendation on relevant product market and service markets within the electronic communications sector
susceptible to ex ante regulation in accordance with Directive 2000/21/EC of the European Parliament and of the Council on a common regulatory
framework for electronic communications networks and services, 9 October 2014, OJ L 295, 11 October 2014, p. 79 – 84 (hereinafter the
"Recommendation"). The previous Recommendation of 17 December 2007 (hereinafter the "2007 Recommendation") categorized in its annex Market 4 as
"Wholesale (physical) network infrastructure access (including shared or fully unbundled access) at a fixed location" and Market 5 as "Wholesale
broadband access". Under the revised Recommendation, the Commission categorized under Market 3, two sub-types: (a) "Wholesale local access
provided at a fixed location" and (b) "Wholesale central access provided at a fixed location for mass-market products".

[13]  ComReg Consultation on Proposed Remedies for NGA Markets, document no. 12/27, 4 April 2012, paragraphs 6.33 and 6.34.

[14]  ComReg Decision D03/13 on Remedies for Next Generation Access Markets, Document 13/11, 31 January 2014.

[15]  Case M.5532 Carphone Warehouse/Tiscali UK, 26 June 2009, paragraph 33.

[16]  ComReg Market Review Decision no. D05/10 on Wholesale (Physical) Network Infrastructure, document no. 10/39, 20 May 2010, paragraph 4.123.

[17]  Case M.5532 Carphone Warehouse/Tiscali UK, 26 June 2009, paragraph 49.

[18]  Case M.6992 Hutchison 3G UK / Telefonica Ireland, 28 May 2014, paragraph 141; Case M.7109 Deutsche Telekom / GTS, 15 April 2014, paragraph
43.

[19]  Case M.6497 Hutchison 3G Austria / Orange Austria, 12 December 2012, paragraph 58.

[20]  Case M.6992 Hutchison 3G UK / Telefonica Ireland, 28 May 2014, paragraph 141 onwards.

[21]  Case M.7231 Vodafone / ONO, 2 July 2014, paragraph 38.

[22]  Case M.6992 Hutchison 3G UK / Telefonica Ireland, 28 May 2014, paragraph 164; Case M.7109 Deutsche Telekom / GTS, 15 April 2014, paragraph
49; Case M.7231 Vodafone / ONO, 2 July 2014, paragraph 42.

[23]  Case M.7109 Deutsche Telekom / GTS, 15 April 2014, paragraph 34; Case M.6584 Vodafone / Cable&Wireless, 3 July 2012, paragraph 11.

[24]  Case M.5532 Carphone Warehouse/Tiscali UK, 26 June 2009, paragraph 37.

[25]  Case M.6990 Vodafone / Kabel Deutschland, 20 September 2013, paragraphs 130 – 131.

[26]  Case M.7231 Vodafone / ONO, 2 July 2014, paragraphs 26 – 28.

[27]  Case M.5532 Carphone Warehouse/Tiscali UK, 26 June 2009, paragraph 56; Case M.6990 Vodafone / Kabel Deutschland, 20 September 2013,
paragraph 137; Case M.7231 Vodafone / ONO, 2 July 2014, paragraph 31.

[28]  Case M.5532 Carphone Warehouse/Tiscali UK, 26 June 2009, paragraph 10.

[29]  Case M.5532 Carphone Warehouse/Tiscali UK, 26 June 2009, paragraph 20; Case M.7231 Vodafone / ONO, 2 July 2014, paragraph 17.

[30]  Case M.7109 Deutsche Telekom / GTS, 15 April 2014, paragraph 57; Case M.7231 Vodafone / ONO, 2 July 2014, paragraph 22.

[31]  Eircom's press release "eircom Passes One Million Premises Milestone" (8 September 2014), available at:
http://pressroom.eircom.net/press_releases/article/eircom_Passes_One_Million_Premises_Milestone/.

[32]  ComReg Decision No. D05/105 (20 May 2010) and ComReg Decision No. D06/116 (8 July 2011).

[33]  Eircom's press release "eircom Statement on ESB/Vodafone Joint Venture" (2 July 2014), available at:
http://pressroom.eircom.net/press_releases/archive/2014/07/.

[34]  Parties' response of 11 September 2014 to the Commission RFI of 23 August 2014.

[35]  UPC's network is based on hybrid fibre co-axial technology, which combines optical fiber and co-axial cable.

[36]  UPC's press release "UPC demonstrates leadership through Internet speed jump – Fastest home broadband provider in Ireland launches Horizon
120 Mb service as new entry level", 14 October 2013, available at: http://www.upc.ie/pdf/UPCInternetspeed.pdf; UPC's press release "UPC Business
answers need for speed with launch of 250 Mb service", 15 January 2014, available at: http://www.upc.ie/pdf/pressrelease/250Mb-service.pdf;
UPC's press release "An Taoiseach launches New UPC 500 Mb Broadband for Businesses", 30 January 2014, available at:
http://www.upc.ie/pdf/pressrelease/500mb.pdf.

[37]  The current ComReg data shows that most business users subscribe to broadband internet services with download speeds of between 2 Mbps –
10 Mbps while most residential users subscribe to broadband services with speeds >=30 Mbps, delivering average speeds of <50 Mbps (Source:
ComReg Quarterly Key Data Report for Q2 2014).

[38]  Eircom's press releases "eircom Passes One Million Premises Milestone" (8 September 2014), available at:
http://pressroom.eircom.net/press_releases/article/eircom_Passes_One_Million_Premises_Milestone/ and "Eircom Statement on ESB/Vodafone Joint
Venture" (2 July 2014), available at: http://pressroom.eircom.net/press_releases/archive/2014/07/.

[39]  Horizontal overlaps between the Parties arise due to activities of both ESB and Vodafone in the following potential markets (i) wholesale
leased lines, (ii) services relating to infrastructure used to support radio-based access for communications equipment, and (iii) retail
provision of business connectivity services. Nevertheless, the transaction does not give rise to affected markets nor to the risk of
coordination between the Parties because of these horizontal overlaps, in particular given the Parties' limited market shares (the Parties'
market shares are the following: (i) wholesale leased lines: Vodafone: <1%; ESB: estimated at [0-5]% and, in any event, less than [10-20]%; (ii)
services relating to infrastructure used to support radio-based access for communications equipment: Vodafone: [10-20]% (on a national basis),
[0-5]% (in Phase One footprint); ESB: [5-10]% (on a national basis), [5-10]% (in Phase One footprint); (iii) retail provision of business
connectivity services: Vodafone: [5-10]%, ESB <1%).

[40]  As mentioned in footnote 3, Vodafone is not currently active in any television markets in Ireland. However, Vodafone may set up a
television platform in Ireland in the future and could potentially utilise the JV’s FTTB network for the purpose of providing television
services (Form CO, paragraph 156).

[41]  Vodafone's market share on the market for retail provision of fixed internet access is 16%. If this market were to be divided by
technology, Vodafone's market share would be higher in the markets for the technology that it uses to offer retail broadband, namely DSL.
However, even in that market, Vodafone's market share would not be so high as to change the competitive assessment. In the market for DSL
broadband services, Eircom's market share is 53.7%.  The remaining 46.3% of the market is held by several operators, including Vodafone. See
ComReg, Quarterly Key Data Report, 14/97, 11 September 2014.

[42]  While BT Ireland also provides wholesale access to downstream operators, it does so based on local loop unbundling, relying on the network
of Eircom.

[43]  The advanced technology and higher speeds of the new FTTB network will also contribute to achieving the broadband targets set in the EU's
Digital Agenda.

[44]  Guidelines on the assessment of non-horizontal mergers under the Council Regulation on the control of concentrations between undertakings,
OJ C 265, 18 October 2008, p. 6, paragraph 35.

[45]        Eircom's press release "eircom Passes One Million Premises Milestone" (8 September 2014), available at:
http://pressroom.eircom.net/press_releases/article/eircom_Passes_One_Million_Premises_Milestone/.

[46]  Under the JVA, […].

[47]  While the exact extent of the overlap between the networks of the JV and of Eircom is currently unknown (see paragraph (52)), it is likely
to be substantial, given that Eircom intends to cover all 50 towns in the JV's Phase One footprint.

[48]  Judgment of 3 April 2003, BaByliss SA v Commission, T-114/02, EU:T:2003:100, paragraph 441.

[49]  Judgment of 31 January 2001, RJB Mining plc v Commission, T-156/98, EU:T:2001:29, paragraph 115.

[50]  This decision is without prejudice to the obligation for the Parties to comply with the Cost Reduction Directive (Directive 2014/61/EU of
the European Parliament and of the Council of 15 May 2014) once transposed and the obligations of the relevant authority to ensure compliance to
this effect.

-----------------------
 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.

                                                                  PUBLIC VERSION

                                                                 MERGER PROCEDURE