CELEX: 31995M0618
Language: en
Date: 1995-08-16 00:00:00
Title: COMMISSION DECISION of 16/08/1995 declaring a concentration to be compatible with the common market (Case No IV/M.618 - Cable and Wireless / Veba) according to Council Regulation (EEC) No 4064/89 (Only the English text is authentic)

Avis juridique important

|

31995M0618

COMMISSION DECISION of 16/08/1995 declaring a concentration to be compatible with the common market (Case No IV/M.618 - Cable and Wireless / Veba) according to Council Regulation (EEC) No 4064/89 (Only the English text is authentic)  

Official Journal C 231 , 05/09/1995 P. 0003

  COMMISSION DECISION of 16/08/1995 declaring a concentration  to be compatible with the common market (Case No IV/M.618 -  Cable + Wireless / Vebacom) 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)(b) DECISION  To the notifying parties  Dear Sirs,  Subject :<ind> Case N  IV/M.618  CABLE AND WIRELESS/VEBA  <ind> <ind> Notification of a concentration pursuant to  Article 4 of Council Regulation No 4064/89  1.<ind> The above operation concerns the formation of two  jointly controlled companies : VEBACOM and Cable & Wireless  (Europe) to offer telecommunications services in Germany and  the EU (plus Switzerland but excluding the UK) respectively.  After examination of the notification, the Commission has  concluded that the notified operation falls within the scope  of the Merger Regulation and that it does not raise serious  doubts as to its compatibility with the common market.  I <ind> THE PARTIES  2.<ind> Cable and Wireless plc (C&W) is an international  provider of telecommunications services with activities in  Asia, the Caribbean, Europe, the United States, Japan, the  Middle East and Africa. Its European activities are centred  in the UK with its majority interest in Mercury  Communications, the second telecommunications operator  following liberalisation of services in the UK. C&W also has  a worldwide strategic alliance called the C&W Federation.  The C&W Federation is an umbrella organisation which  provides the participants with the opportunity to cooperate  by making facilities available and offering joint services  to multinational corporate clients.  3.<ind> VEBA AG is a German holding company for subsidiaries  with activities in electricity, chemicals, oil, trade,  transport and services and telecommunications. Its existing  telecommunications interests are consolidated in VEBA  Telecom. VEBA holds a shareholding of 10.5% in C&W and is a  member of the C&W Federation.  II<ind> THE OPERATION  4.<ind> The operation consists of the formation of two joint  ventures in Europe in the telecommunications sector. The  first, VEBACOM, will comprise all the parties'  telecommunications interests in Germany (except for certain  dedicated telecommunications activities carried out by and  for other VEBA AG companies). The second, Cable & Wireless  Europe (CWE), will be established in Belgium and will  contain substantially all the parties' activities in Europe  other than in Germany or the UK. C&W will keep Mercury  Communications and the PCN operator Mercury One2One outside  the joint ventures.   5.<ind> Both parties have activities in PCN networks in  Europe. C&W has a 50% stake in Mercury One2One in the UK, a  20% stake in Bouygues Telecom in France and a 5% stake in  Mannesmann Mobilfunk GmbH in Germany. VEBA has a 28.375 %  stake in EPlus in Germany and a 15% stake in Bouygues  Telecom. The EPlus stake will be transferred from VEBA to  VEBACOM at closing. The two parents' stakes in Bouygues  Telecom will be managed by CWE for 12 months after which  time they will be transferred to CWE or the new joint  venture outlined below. C&W has undertaken, at the request  of VEBA to either dispose of or waive its rights in  Mannesmann Mobilfunk (except those relating to dividends).  The C&W stake in Mercury One2One will remain outside the  joint venture.  6.<ind> The interests in the Swiss cable TV activity,  Cablecom andthe French paging business Infomobile will be  transferred to CWE following the consent of the other  shareholders. In the meanwhile, the stakes will be managed  by VEBACOM and CWE respectively. The transfer of shares in  the relevant C&W subsidiaries will be completed within three  months of closing. C&W also has a holding in Tele 2 (the  Swedish PSTN operator) which may also be held for a short  period before being transferred to the JV. CWE will also  manage the two parents' stakes in Bouygues Telecom (C&W   20%, VEBA  15%).  III<ind> CONCENTRATION  <ind> Joint control  7.<ind> The shares in VEBACOM will be held 55% by VEBA  (through VEBA Telecom) and 45% by C&W. VEBA will have the  management lead in VEBACOM. VEBACOM will have four levels of  corporate governance: Shareholders' Meeting, Shareholders'  Committee, Supervisory Board and Management Board. Day to  day matters will be dealt with at the latter level.  Strategic decisions will be taken in the Shareholders'  Committee and will require unanimity for inter alia future  budgets and business plans following the expiry of the start  up business plan for 1995/97 and the budget for 1995,  capital expenditure of over DM 50 million and the entering  into of any interconnection agreement over DM 10 million.  <ind> Accordingly, VEBACOM will be jointly controlled by C&W  and Veba.  8.<ind> The shares in CWE will be held 50% each by C&W and  Veba. Day to day management of CWE will be delegated to a  management committee which will consist of at least three  people and will be lead by C&W. This committee will manage  CWE's affairs in accordance with its business plan and  budget.  <ind> CWE's board of directors will manage the companies'  ordinary activities and will consist of no fewer than eight  directors, four from each parent. Other directors can be  appointed with the agreement of both shareholders. The  initial business plan (1995/97) and budget have been agreed  by C&W and Veba. A revised business plan (1995/99) may be  agreed precompletion. All future business plans and budgets  will require the unanimous approval of CWE's board of  directors as well as decisions on capital expenditure in  excess of DM 50 million and applications for licences from  regulatory authorities.  <ind> Accordingly, CWE will be jointly controlled by C&W and  VEBA.  <ind> Autonomous full function entity  9.<ind> The activities of the parent companies in the  allocated territory will be taken over by the joint venture.  VEBA's telecommunications interests in Germany will be taken  over by VEBACOM. C&W will transfer activities in the  relevant territories to CWE. Both companies'  telecommunications businesses in the territories of the  joint ventures will be contributed to the joint ventures  together with their respective staff. Therefore, the two  joint ventures are autonomous entities on a lasting basis.  <ind> Absence of coordination of competitive behaviour  <ind> (a)<ind> Withdrawal of VEBA from the market  10<ind> By the operation, VEBA will transfer all of its  principal activities in telecommunications into the joint  ventures. It will, however, retain certain marginal  activities which are integrated into their subsidiaries  which operate in other (nontelecommunications) sectors.  These include the internal telecommunications activities of  the VEBA subsidiary companies (for example the remote  measurement of heat consumption by energy companies via  telecommunications networks) which are incidental to those  companies' activities. They do not undermine VEBA's  withdrawal from the telecommunications market.  <ind> VEBA's has a noncontrolling stake (10.5%) in C&W and a  standstill agreement has been signed by which VEBA  undertakes not to increase it any further. VEBA has one  member of the board of C&W by invitation of C&W.  <ind> Accordingly, VEBA does not exercise any control over  C&W and therefore it cannot be considered to retain any  presence in telecommunications activities other than through  the joint venture.  <ind> (b)<ind> No likelihood of the reentry of parent  companies into the markets of the joint venture  11.<ind> As both C&W and VEBA will put all their  telecommunications activities (with certain minor exceptions  as set out above) in the allocated territories into the  joint ventures, it is not economically feasible for the  parents to reenter the market incompetition with either of  the joint ventures. This is particularly true for C&W which  would, outside VEBACOM, lack the local knowledge for a  successful entry into the German market alone. This  withdrawal from the market is confirmed by the noncompete  clause in the VEBACOM agreement which excludes the  possibility of a separate entry into the German market by  C&W with any other German partner.  <ind> In respect of PSTN networks, certain activities in  which VEBACOM is expected to be active, may involve the use  of telecommunications infrastructure which belongs to the  VEBA subsidiary PreussenElektra. According to the agreement,  VEBA has specified that it will offer to VEBACOM use of that  network on at least open market arm's length terms which it  offers to third parties. The right of VEBACOM to use the  network cannot be of an exclusive nature since VEBA is  obliged to offer use of the PreussenElektra network to third  parties by draft German legislation which will implement the  Open Network Provision directive (90/387/CE). However, this  provision only applies to third party access and not to the  possibility of VEBA offering telecommunications services in  competition to VEBACOM. Through the alliance with C&W,  VEBACOM shall financially and technologically be put into  the position to compete in services with Deutsche Telekom  and other suppliers from 1998 onwards. Also, VEBA will  transfer to VEBACOM both the shareholding and any rights in  respect of the proposed joint venture with Deutsche Bahn to  establish a fibre optic network. A reentry of VEBA into the  market is therefore equally very unlikely.  <ind> The VEBACOM agreement contains a very limited  exception to the noncompete clause which allows for the  possibility of financial investments by one of the parents  alone if and only if they cannot agree within VEBACOM.  <ind>   <ind> For these reasons there is no likelihood of the parent  companies reentering the market of either of the joint  venture companies.  <ind> (c)<ind> Conclusion on absence of coordination  12.<ind> In the light of the above information, there are no  grounds to consider that the establishment and operation of  CWE or VEBACOM will lead to the coordination of the  competitive behaviour of independent undertakings, falling  within the meaning of Article 3(2) second subparagraph of  the Merger Regulation.  <ind> Conclusion  13.<ind> Thus, the notified operation constitutes a  concentration within the terms of Article 3 of the Merger  Regulation  IV<ind> COMMUNITY DIMENSION  14.<ind> C&W has a worldwide turnover of 6,615 million ECU  in the last financial year whilst VEBA has a worldwide  turnover of 36,915 million ECU. C&W has a turnover of 2,219  million ECU in the EU whilst Veba's EU turnover is 30,927  million ECU. C&W makes over twothirds of its EU turnover in  the United Kingdom whilst VEBA makes more than twothirds of  its EU turnover in Germany.  15.<ind> Accordingly, the concentration has a Community  dimension within the meaning of Article 1 of the Merger  Regulation.  V<ind> COMPATIBILITY WITH THE COMMON MARKET  <ind> Market definitions  16.<ind> VEBACOM and CWE will be active in the following  fields: national and international fixed terrestrial  telephone networks, satellite telecoms services, mobile PCN  networks, paging, cable TV, corporate networks, managed  bandwidth and valueadded services. However, there is no  overlap between the two companies' activities in any of  these fields and also significant actual (eg Deutsche  Telekom) and potential (eg the emerging alliances mentioned  below) competitors are present.  17.<ind> There is no overlap between Veba´s and C&W´s  activities for national and international terrestrial  networks since for the time being, VEBA does not operate  those networks for third parties. The optic cable system of  PreussenElektra, a subsidiary of VEBA, currently only serves  its internal telecoms use, and the proposed joint venture  between VEBA and Deutsche Bahn AG concerning the  installation of fibreoptic links alongside railway lines in  Germany with regard to deregulation in 1998 would be  established through VEBACOM. Furthermore, VEBA has no  activities in managed bandwidth and international voice  access nor is C&W active in satellite telecoms services.  18.<ind> Mobile telephone networks form a distinct market  from fixedtelephony markets. PCN networks, in particular,  have some characteristics which even distinguish them from  GSM mobile networks. PCN ("Personal Communication network")  and GSM ("Global System for Mobile communication") operate  on different frequencies (900 MHz for GSM and 17101880 MHz  for PCN). A PCN network requires a denser system of  transmitters and rather aims at local or regional users. In  the UK, PCN phones are primarily used by domestic and  smalltrade users. A PCN phone can, furthermore, not log into  a GSM network at present. PCN networks which are also  licensed on a national basis are altogether younger than GSM  networks and the system infrastructure is still in the  developing stage (see for example EPlus as compared to the  D1 and D2 GSM networks in Germany). International roaming  agreements do not yet exist, and even national coverage is  not yet reached for PCN in any Member State. Due to these  characteristics of PCN, there are strong indications that  PCN forms a separate product market which is different from  GSM and has to be considered as a national market.  19.<ind> However, the precise market definition can be left  open as, even on the basis of the narrowest market  definition, the concentration raises no competition  problem.  20.<ind> Mobile radio paging systems represent a separate  product market which has to be considered on a national  basis due to national regulatory systems and marketing on a  national level.  21.<ind> The markets for cable TV networks are equally  national in scope (see Commission´s decision of 19.7.1995,  IV/M.490  Nordic Satellite Distribution, no. 73).  22.<ind> Corporate networks exist for data transmission and  for voice transmission between large closed user groups. The  concentration involves data network services which are  provided on a national or international level according to  the needs required by corporate customers.   23.<ind> Valueadded services comprise a wide range of  electronic communication applications which are tailored to  the needs of customers. They may include messaging services  (EDI, Email, Efax, multimessaging), inflight telephony or  access to databases. In the absence of regulatory or  technical barriers, this market is EEAwide, if not a world  market.  24.<ind> In conclusion, given the absence of any competition  problems in any of the possible market segments affected by  the operation (as set out above), there is no need to define  either product or geographic markets precisely.  <ind> Assessment  25.<ind> Apart from the abovementioned markets where either  of the parent companies has not been active up to now, the  areas of paging and cable TV involve only activities on the  side of VEBA, which will be transferred to the JVs: a 40 %  interest of VEBA in Miniruf GmbH in Germany and a 10% stake  in Infomobile SA in France (both in paging). C&W´s paging  activities in the UK will, in any case, remain outside the  operation. VEBA will transfer two cable TV businesses, Tele  Columbus and Concepta Kommunikations und Gebaeudetechnik  GmbH, as well as a Swiss subsidiary (Cablecom) into VEBACOM  while C&W´s cable TV interest in the UK will remain  separate. In the absence of any overlap, competition  concerns do not arise. In particular, VEBA could not be seen  as a potential entrant in the UK in both markets which are  determined by licence requirements and strong actual  competitors (BT Mobile, Vodapage, Hutchinson in paging; and  regional cable TV operators).  26.<ind> As to corporate networks and valueadded services,  VEBA has a controlling interest in Meganet, which operates a  data network primarily for customers of the financial and  services sector in Germany, and in LION which provides  different communication solutions. Apart from its business  in the UK, C&W is active in Germany only as far as  Germanybased multinational companies or the "German end" of  international networks are concerned. Since a number of  significant suppliers such as national telecom operators  (e.g. Deutsche Telekom), telecoms and computing service  providers (IBM, EDI etc.) and a growing number of recently  created or proposed alliances (e.g. BT/Viag, RWE/Générale  des Eaux) are already active or will offer those services in  these fields, the proposed concentration does not raise a  competition problem.  27.<ind> Finally, both parent companies have interests in  PCN networks which will, apart from C&W´s UK activities  ("One2One"), be part of the JVs´ businesses. VEBACOM has a  28.375% stake in EPlus in Germany, and both have interests  in Bouygues Telecom, currentlythe only operator of PCN in  France (C&W 20 %, VEBA 15 %). The parties might at a later  stage put all these interests together in another joint  venture as it is foreseen in a nonbinding Memorandum of  Understanding. At present, EPlus will be part of VEBACOM,  and the two stakes in Bouygues will, as set out above, be  managed by CWE until the final transfer of the shares within  12 months time provided the agreement of the other Bouygues  shareholders has been secured. The three PCN networks in  which the parties or the JVs are involved operate in  different member states. This would, on the assumption of  national markets, exclude any overlap in market shares. On a  European wide market for PCN and GSM combined, the market  shares of the two parties taken together would be well below  10%.  28.<ind> As a result, the creation of VEBACOM and CWE will  not lead to the creation or the strengthening of a dominant  position in any market.   VI<tab> ANCILLARY RESTRAINTS  29.<ind> In each of the Shareholders' Agreements, C&W and  VEBA each undertake to procure that none of their respective  group companies will compete with the two JVs. These  noncompete covenants are necessary to reflect the lasting  withdrawal of C&W and VEBA from the JVs' markets and are  integral to the concentration.  VII<ind> CONCLUSION  <ind> The proposed concentration therefore does not raise  serious doubts as to its compatibility with the common  market.  <ind> 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.  Fo the Commission