CELEX: 31998J0003
Language: en
Date: 1998-07-08 00:00:00
Title: COMMISSION DECISION of 08/07/1998 declaring a concentration to be compatible with the common market (Case No IV/M.3 - * BT / AIRTEL) according to Council Regulation (EEC) No 4064/89 (Only the English text is authentic)

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31998J0003

COMMISSION DECISION of 08/07/1998 declaring a concentration to be compatible with the common market (Case No IV/M.3 - * BT / AIRTEL) according to Council Regulation (EEC) No 4064/89 (Only the English text is authentic)  

Official Journal C 369 , 21/12/1999 P. 0024 - 0024

COMMISSION DECISION of 08/07/1998 declaring a concentration to be compatible with the common market (Case No IV/M.3 - * BT / AIRTEL) according to Council Regulation (EEC) No 4064/89 (Only the English text is authentic)Brussels, 08.07.1998To the notifying parties,Dear Sirs,Subject : Case No. IV/JV.3 - BT/AirTouch/Grupo Acciona/AirtelNotification of 5 June 1998 pursuant to Article 4 of Council Regulation No. 4064/891. On 5 June 1998, the Commission received the notification of a proposed concentration pursuant to Article 4 of Council Regulation (EEC) 4064/89 [1]. Pursuant to this operation, the undertakings BT, AirTouch and Grupo Acciona will acquire joint control over the undertaking Airtel, which is already in existence and active in the provision of mobile telephony services in Spain.[1]  OJ L 395, 30.12.1989, Corrigendum OJ L 257, 21.9.1990, as amended by Council Regulation (EC) 1310/97 of 30 June 1997, OJ L 180, 9.7.1997 (together: the Merger Regulation).2. After examination of the notification, the Commission has reached the conclusion 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. PARTIES3. The parties involved in this concentration are the following. British Telecommunications plc (BT) is the incumbent telecommunications operator in the United Kingdom. Its mobile activities include a controlling shareholding in the analogue and GSM operator Cellnet and a non-controlling stake in the French GSM operator SFR and in joint ventures in Germany, Sweden and The Netherlands. AirTouch International is an U.S.A. telecommunications operator with world-wide activity in mobile telephony and stakes in operating joint ventures in Germany, Italy, Belgium, Portugal and Sweden, acting through its subsidiary AirTouch (Europe) BV. Grupo Acciona S.A. is a Spanish financial investment company, which is acting through its subsidiary Inversiones Europa S.A. for this operation. Airtel Movil S.A., the second GSM mobile operator in Spain currently has 13 shareholders, the biggest of which are AirTouch and BT. II.  THE OPERATION4. The operation concerns the signing of an Alliance Agreement, on 23 April 1998, amongst five of the existing shareholders of Airtel. These parties are BT (15.81% of Airtel shares) , AirTouch (21.70%) and Grupo Acciona (10.85%), as described above, and two investment companies based in Spain: Torreal S.A. (5.02%) and Corporación Financiera Alba S.A. (2.53%).5. Before this operation, Airtel was not subject to control by any individual company. The five above mentioned shareholding companies account together for approximately 56% of the shares of Airtel. 6. By its decision of 26 May 1998 the Commission granted the parties a derogation from the obligation to suspend the concentration laid down in Article 7 (1) of the Merger Regulation. This derogation was granted in order to facilitate the parties some of the preliminary actions which the parties needed to take immediately to ensure the success of their operation. Those actions comprised the reduction of the number of members of the Executive Committee,  the determination of the specific duties and authorities of the Managing Director and the creation of a committee to investigate the technical areas provided for in the agreement.III. CONCENTRATION Joint Control7. According to the notification, AirTouch will hold 38.81%, BT will hold 28.28%, Grupo Acciona will hold 19.41%, Torreal will hold 8.98% and Corporación Financiera Alba will hold 4.52% of the Alliance votes. These shareholdings in the Alliance mirror the proportion of the parties' shareholdings in Airtel. The Alliance Agreement obliges them to vote together in the board and shareholders meetings of Airtel.8. Section 4.4 of the Alliance Agreement provides that decisions concerning, among others, the approval of Airtel's first Business Plan following the creation of the Joint Venture, the approval of budgetary deviations of more than [...] from Airtel's Business Plan, the appointment of Airtel's Managing Director, as well as the approval of Airtel's major business transactions require a qualified majority of at least [...] of the Alliance votes. All other matters not explicitly listed require a simple majority of 50.01% of the Alliance votes.9. Therefore, only AirTouch, BT and Grupo Acciona will be able to veto the strategic decisions within the Alliance Agreement listed above and will therefore enjoy joint control over Airtel. In contrast, both Torreal's and Corporación Financiera Alba's shares in the Alliance are not sufficiently large to veto the strategic decisions and therefore do not enable these companies to exercise joint control over Airtel.10. Furthermore, Section 8.1 and 8.2 of the Alliance Agreement provide that the parties to the agreement shall appoint the majority of the members of the governing bodies of Airtel, i.e. the Board of Directors and of the Executive Committee, their number being reduced from 26 to 15 and from 11 to 9, respectively.Full-function entity11. Airtel is a company, which has been operating on this market since 1995 as an autonomous economic entity before the conclusion of the Alliance Agreement. As a Joint Venture between the three controlling parties of the Alliance, Airtel will continue to perform all the functions of an autonomous economic entity in the sense of the Merger Regulation.IV. COMMUNITY DIMENSION12. The undertakings concerned have world-wide turnover exceeding 5 billion ECU (BT: 17,822 million ECU, AirTouch 4,267 million ECU, Grupo Acciona 2,245 million ECU and Airtel 133 million ECU). The Community-wide turnover of BT is 17,544 million ECU, AirTouch 1,625 million ECU and Grupo Acciona 2,245 million ECU each of which exceeds 250 million ECU. BT alone achieved two thirds of its aggregate Community-wide turnover in the United Kingdom. Grupo Acciona and Airtel achieve two thirds of their Community-wide turnover in Spain. Therefore not all of the parties achieve their EU wide turnover in one and the same Member State.13. The concentration therefore has a Community dimension within the meaning of Article 1 (2) of the Merger Regulation.V. RELEVANT PRODUCT MARKET14. Airtel is currently engaged in the provision of mobile telecommunications services, in particular of mobile telephony services using the GSM (Global System for Mobile Communications) standard. Airtel will also receive [2] a licence to install and operate a mobile telecommunications network using the DCS 1800 standard which operates within the 1800 MHz bandwidth, but will be prevented from operating DCS-1800 services until 6 months after the award by Spanish Government of a similar licence to a third operator. On 24 June 1998 the Spanish Government decided to award that licence to Retevision (though the licence has not yet been formally awarded). [2]  As consequence of the corrective measures adopted by the Spanish Government following the Commission's Decision of 18 December 1996 concerning the conditions imposed on the second operator of GSM radiotelephony services in Spain (OJ n° L76 of 18.3.1997, page 19)15. In the past the Commission has considered (as, e.g. in its decision in 1995 in the Cable & Wireless/VEBA case) that there were indications that systems such as DCS 1800 are used to operate on a market which is different from the one on which GSM services are provided. In the present case the parties submit that, nowadays, the product market is made up of mobile telecommunications services, notwithstanding the standard they use (analogue, GSM, DCS 1800). The parties sustain their claim by pointing out the increasing availability of GSM/DCS 1800 dual-band handsets, which interface both systems, as well as a number of market factors, such as customer demand to be able to roam between DCS 1800 and GSM networks and the allocation of 1800 MHz spectrum to GSM operators (for example to Airtel and Telefónica in Spain), that indicate that those dual handsets will become the norm. This expected convergence of the two systems has been confirmed by third parties' comments.16.  However, the definition of the relevant product market may be left open since, even on the basis of the most unfavourable definition, the concentration would not create or strengthen a dominant position as a result of which effective competition would be significantly impeded in the common market or a substantial part thereof.VI. RELEVANT GEOGRAPHIC MARKET17. In their notification, the parties argue that the relevant geographic market for Airtel is national. In the parties view, the main factors which would still appear to discourage cross border subscriptions are tariffs, customer acceptance of the concept and the lack of pan European customer service organisations. This view is also shared by other mobile operators.18. The Commission has considered in the past (e.g. in its decision of 1995 on Case No. IV/M.538 OMNITEL) that the digital mobile market was at least potentially a pan-European market. In the light of the previous paragraph the market definition may now be national. However, there are other factors which may imply a future widening of the geographic market definition. These include: the increase in the number of DCS 1800 licences and the likely consequent increase in roaming agreements between DCS 1800 operators as well as the availability of GSM/DCS 1800 dual-band handsets. Furthermore, cellular operators have been reducing their international cellular calling rates significantly during the past few years and this trend can be expected to continue. 19. For the purposes of assessment of the present case, the definition of the relevant geographical market for mobile telephony may be left open since, on the basis of the assessment set out below, a dominant position would not be created or reinforced even under the most unfavourable geographic market definition.VII. COMPETITIVE ASSESMENTA. Dominance 20. Airtel currently has a market share of 35% of the digital mobile market in Spain. Its  sole competitor is Telefonica's (incumbent operator) GSM service. This operation will lead to no addition of market shares in the Spanish mobile telephony market. Even if DCS 1800 based services are considered as belonging to a separate market and if Spain is to be considered as the relevant geographical market, Airtel would not be present on that market at least until December 1998 and would then face competition from Telefónica and from the third DCS 1800 licence holder. Taking also into account the strength of Telefónica and the competitive pressure which will be applied by the new mobile telephony operator, the creation or strengthening of a dominant position in Spain as a result of the present transaction is excluded. 21. On the basis of total number of  digital subscribers within the E.U., the combined market share of BT, AirTouch and Airtel is 17.9% and, therefore, the concentration will not result in the creation of a dominant position if the geographic market is considered to be EU wide. 22. Consequently, the proposed operation does not create or strengthen a dominant position as a result of which effective competition would be significantly impeded in the common market or a substantial part thereof.B. Co-ordination of competitive behaviour23. Pursuant to Article 2 (4) of the Merger Regulation, to the extent that the creation of a joint venture has as its object or effect the co-ordination of the competitive behaviour of undertakings that remain independent, such co-ordination shall be appraised in accordance with the criteria of Article 85 (1) and (3) of the EC Treaty. In order to represent a restriction of competition within the meaning of Article 85 (1), it is necessary that the co-ordination of the parent companies' competitive behaviour is likely and appreciable and that it results from the creation of the joint venture, be it as its object or its effect.24. The present case concerns the acquisition of control of an existing company of which the notifying parties have been shareholders since its creation. Although two of the notifying parties, BT and AirTouch, control or have shareholdings in mobile operators, which are active in other Member States apart from Spain, there are no clear indications which would allow the conclusion that the change in the situation of control within Airtel has the object of co-ordinating the competitive behaviour of BT and AirTouch on any of the markets where they are both present.25. Furthermore, it is not possible to claim with the requisite degree of certainty that the new situation will have the effect of co-ordinating the competitive behaviour of BT and AirTouch, which have, up to now, acted independently in mobile telephony despite the fact that they were both already shareholders (although not controlling ones) in Airtel.26. It follows that in the present case the acquisition of joint control of Airtel by BT, AirTouch and Grupo Acciona will not lead to co-ordination of the competitive behaviour of BT and AirTouch on the market where Airtel is active or on other closely related markets. VIII. ANCILLARY RESTRAINTS27. The obligation which the parties consider as an integral part of or ancillary to the proposed concentration is contained in a non-competition clause, included in Section 10.1 of the Alliance Agreement. Section 10.1 (a) provides that none of the parties nor any member of their respective groups shall engage in any kind of wireless telecommunication services in Spain other than through Airtel.28. However, according to Section 10.1 (b), this restriction is limited insofar as any group member is free to invest in a minority stake in competitors of Airtel as long as they have no involvement in the board or management of such a competing company. Furthermore, pursuant to Section 10.1 (c) to (e), certain activities of the group members are excluded from the scope of the non compete clause, such as mobile telephony services in Gibraltar and the provision or resale of mobile-fixed telephony services in Spain.29. Given the above mentioned limitations, this clause can be considered as directly related and necessary to the implementation of the concentration for the five year duration of the Alliance Agreement. Consequently, it is to be regarded as a restraint ancillary to the concentration.IX. CONCLUSION30. In the light of the above, the proposed transaction does not raise serious doubts as to its compatibility with the common market and with the functioning of the EEA Agreement. 31. The Commission therefore 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 (EEC) No. 4064/89. For the Commission,