CELEX: 31995M0570
Language: en
Date: 1995-04-24 00:00:00
Title: COMMISSION DECISION of 24/04/1995 declaring a concentration to be compatible with the common market (Case No IV/M.570 - Telenordic / BT / Teledanmark / Telenor) according to Council Regulation (EEC) No 4064/89 (Only the English text is authentic)

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31995M0570

COMMISSION DECISION of 24/04/1995 declaring a concentration to be compatible with the common market (Case No IV/M.570 - Telenordic / BT / Teledanmark / Telenor) according to Council Regulation (EEC) No 4064/89 (Only the English text is authentic)  

Official Journal C 154 , 21/06/1995 P. 0004

 COMMISSION DECISION of 24/04/1995 declaring a concentration to be compatible with the  common market (Case No IV/M.570 - TBT / BT / Tele Danmark / Telenor) 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 No. IV/M.570 - TBT/BT/TELE DANMARK/TELENOR <ind> <ind> Your notification of 17 March 1995 pursuant to Article 4 of Council Regulation No.  4064/89 (the Merger Regulation) 1.<ind> The above operation involves the creation of a joint venture to offer voice and data  telecommunication services throughout Sweden. The parents of the proposed joint venture - provisionally to be named TBT Communication AB (TBT)- will be British Telecommunications plc  (BT), the main UK telecommunications company, Tele Danmark A/S (TDK), the Danish national  telecommunications company, and Telenor AS (Telenor), the state-owned Norwegian  telecommunications provider. 2.<ind> 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 3.<ind> BT's principal activity is the supply of telecommunications services and equipment. Its main  services are local and long-distance telephone calls in the UK, the provision of telephone exchange  lines to homes and businesses, international telephone calls made from and to the UK and the supply  of telecommunications equipment for customers' premises. BT and MCI Communications  Corporation (MCI) are partners in the "Concert" joint venture, for the provision of advanced  business telecom services to multinational companies [Case No. IV/M.353 - British Telecom / MCI,  of 13 September 1993 and Case No. IV/34.857 BT-MCI, of 27 July 1994.]. 4.<ind> Tele Danmark is the principal provider of telephone services in Denmark. Other activities  include the supply of telecommunications equipment, telephone directories and cable television. Tele  Danmark operates under a concession granting to it an exclusive right to provide in Denmark,  amongst other services, public voice, leased lines and NMT mobile telephone services and to install  and operate the Danish public telecommunications network infrastructure. Tele Danmark also  operates one of the two Danish GSM mobile telephone services. 5.<ind> Telenor is the principal provider of telephone services in Norway. Other activities include  the supply of telecommunications equipment, telephone directories and cable television. Telenor  operates under a concession granting to it an exclusive right to provide in Norway, amongst other  services, public voice, leased lines and NMT mobile telephone services and to install and operate the  Norwegian public telecommunications infrastructure. Telenor also operates one of the two  Norwegian GSM mobile telephone services. <ind> II.<ind> THE OPERATION 6.<ind> Under Article 3.1 of the Joint Venture and Shareholders' Agreement establishing TBT, the  objectives of the company will be: <ind> -<ind> to implement, operate and manage a Swedish domestic fixed telecommunications  network through the establishment by the company of its own network and through arrangements  with third parties, <ind> -<ind> to establish the ability to provide international connections and services in Sweden  through appropriate interconnection and distribution arrangements with third parties, and <ind> -<ind> with those network capabilities to market, sell, provide, and service in Sweden  domestic and international telecommunication services (voice and data) by itself and through  appropriate third party channels. 7.<ind> The parents of TBT will transfer to the joint venture all their existing activities in the  Swedish voice and data services' markets. However, BT and Telenor will retain outside the joint  venture their existing equipment distribution activities in Sweden. This accounts for turnover of  ECU [Deleted business secret.] million compared with the expected turnover of the joint venture in  the first year of operation of approximately ECU [Deleted business secret.] million. This percentage  will decrease markedly in the future as TBT's turnover rises. All three parents will remain on the  relevant product markets in other geographic markets eg the UK, Denmark and Norway. 8.<ind> The parents will continue to be present in serving the international correspondent services  between Sweden and their home territories. In doing so they will only continue to ensure the  indispensable interconnection between their home network and the various Swedish networks. In  other words, where a customer uses any Swedish network to place a call out of Sweden the latter may  use one of the joint venture's parents to connect the call in Norway, the UK or Denmark. 9.<ind> The Joint Venture and Shareholders' Agreement also contains a non-compete clause  between the parents and the joint venture in respect of voice and data telecommunications services  (Article 23). However, the parents will retain the possibility to operate in the following neighbouring  product markets (in addition to the correspondent services provision set out in paragraph 8 above):  customer premises equipment, integration of telecommunications services with customer premises  equipment, data processing, in flight air-to-ground and air-to-satellite communications and  distribution of TV programming by satellite. <ind> III.<ind> COMMUNITY DIMENSION 10.<ind> The operation has a Community dimension. The worldwide turnover of all the  undertakings concerned in their respective last financial year amounts to more than 5000 million  ECU. The Community wide turnover of both BT and Tele Danmark exceeds 250 million ECU. The  undertakings concerned do not achieve more than two-thirds of their aggregate Community wide  turnover within one and the same Member State. 11.<ind> Only Telenor has annual turnover exceeding 250 million ECU in the territory of the EFTA  states and the combined turnover of the undertakings concerned in the territory of the EFTA states  does not equal 25% or more of their total turnover in the EEA territory. Therefore the operation is  not an EFTA co-operation case. <ind> IV.<ind> CONCENTRATION <ind> Joint control 12.<ind> The joint venture agreement between the parties provides for joint control in the sense that  the agreement of each of the three parents is required for fundamental decisions regarding the  operation and management of TBT. 13.<ind> Each party will own one-third of the shares of TBT. [Deleted business secret.] As such no  individual party will have a sufficient majority to control either a shareholders' meeting or a meeting  of the Board of Directors. 14.<ind> More importantly, certain decisions essential to the strategic commercial decision-making  of TBT are effectively subject to veto rights by each of the parties. [Deleted business secret.]. 15.<ind> In the light of the above, TBT is jointly controlled by BT, Tele Danmark and Telenor. <ind> Full function 16.<ind> TBT will perform on a lasting basis all the functions of an autonomous economic entity. 17.<ind> Examination of the business plan of TBT clearly shows the parties' intention that the joint- venture operate on a long-lasting basis. There is no limitation on the duration of the Joint Venture  and Shareholders' Agreement. 18.<ind> TBT will operate in an autonomous manner. Article 3.2 of the same agreement states that  TBT "shall carry out its business in a proper and efficient manner and at commercial arms' length  terms and conditions also in relation to all transactions entered into by it with (each of) its  shareholders". 19.<ind> Lastly, TBT will be a full-function joint-venture, performing all the functions normally  carried out by other undertakings operating in the same market. [Commission notice on the  distinction between concentrative and cooperative joint ventures, point 13, OJ C385, 31.12.94.] It  will be endowed with sufficient financial and other resources including finance, staff, and assets to  operate on a long-lasting basis. 20.<ind> The parents of TBT will transfer to the joint venture all their existing activities in the  Swedish voice and data services markets and have budgeted for a capital expenditure by the joint  venture of around ECU [Deleted business secret.] million over its first 10 years. Its total headcount  requirement is estimated at [Deleted business secret.] for 1995 rising to a forecast [Deleted business  secret.] in 2004. TBT's initial staffing requirement is comparable to that of Tele2 AB, the number 2  telecoms player in the Swedish market after Telia AB, the indigenous state-owned telecom  company. 21.<ind> TBT will be both a network operator and service provider. It will, in principle, offer  communication services throughout all of Sweden. [Deleted business secret.]. 22.<ind> The fact that TBT will interconnect with other telecom operators does not prejudice its  full-function nature. Indeed, interconnection in one form or another is an essential feature of telecom  activities. This is most clearly visible in international calls where in order to successfully link the  domestic caller (" the A end of the call") to the foreign subscriber ("the B end of the call"), a  domestic telecom operator must necessarily be linked either directly or indirectly to the receiving  telecom operator. Consequently, this interdependence of telecom operators does not prejudice the full  functionality of individual telecom operators. <ind> In conclusion, TBT will perform on a long-lasting basis all the functions of an autonomous  economic entity. <ind> Absence of coordination of competitive behaviour 23.<ind> The objective of TBT is to create a fully-fledged domestic telecoms operator for voice and  data, domestic and international services in Sweden. The parents of TBT provide such services in  their respective territories outside Sweden. TBT will also be the exclusive sub-distributor of BT in  Sweden for Concert services. Under separate arrangements it is expected that TDK and Telenor will  become exclusive distributors of Concert services in Denmark and Norway respectively. The  question of whether TBT will serve as an instrument for the coordination of the competitive  behaviour of its parents needs to be addressed. <ind> A<tab> Telecommunications services provided by TBT <ind> i) Voice and data services 24.<ind> The parents of TBT will transfer to the joint venture all their existing activities in the  Swedish voice and data services' markets. Moreover, under Article 23(1) of the Joint Venture and  Shareholders' Agreement, the parents have undertaken not to "engage directly or indirectly in the  business of selling in Sweden, telecommunication services in competition with the company".  Although the absolute amount of investment represented by the joint venture is not very substantial  in telecom terms, it is nevertheless significant and it can normally be considered that the parents  would not seek to re-enter the Swedish market on their own account [Commission notice on the  distinction between concentrative and cooperative joint ventures, point 18, footnote 19, OJ C385,  31.12.94.]. <ind> ii) Refiling and transit traffic 25.<ind> Refiling of telecommunications traffic takes place where traffic from Country A to Country  C is routed through Country B and where the TO in Country C is unable to see that the traffic  originated in Country A and not Country B. Refiling is only becoming a reasonably common  phenomenon in relation to traffic consisting of corporate customers and/or closed user groups. In  fact, none of the parties currently generates turnover from refiling of general purpose carrier traffic.  As far as corporate customers and/or closed user groups are concerned, this falls broadly into the  category of enhanced international telecommunications services and represents less than [Deleted  business secret, between 0 and 5%.] of BT's international turnover. Neither Tele Danmark nor  Telenor are engaged is this activity.  26.<ind> Transit is used to describe the situation where traffic from Country A to Country C is  routed through Country B according to an agreement between the TOs involved.. Transit traffic is  common where there is no direct link between the TO in Country A and the TO in Country C. The  parties estimate that the transit traffic market in Europe is around 1-2% of the overall European  international telecommunications market. Unless TBT develops a large network of direct links with  other TOs, it is unlikely to develop as a significant transit operator. 27.<ind> In view of the current state of development of the global telecommunications market, there  is no appreciable likelihood of co-ordination through refiling or transit traffic. <ind> iii) Concert services 28.<ind> BT will transfer its existing Concert activities in Sweden to TBT [The transfer of activities  is an indicator for the absence of coordination -Commission notice on the distinction between  concentrative and cooperative joint ventures, point 18, OJ C385, 31.12.94.]. The Commission  decision in Case No. IV/M.353 - British Telecom / MCI, of 13 September 1993 established that the  market for Concert services was global. Thus BT and TBT, as well as potentially TDK and Telenor,  can be considered to be in the same world market for Concert services. Concert services are expected  to amount to between [less than 20%.] and [less than 20%.] of TBT's turnover.  29.<ind> Outside the Americas [Case No. IV/34.857 BT-MCI, of 27 July 1994, see point 26(a).] BT  enjoys exclusive rights to the distribution of Concert. BT may sub-licence on an exclusive basis as in  the case of TBT. In accordance with the Commission notice on the distinction between concentrative  and cooperative joint ventures [Commission notice on the distinction between concentrative and  cooperative joint ventures, point 8, OJ C385, 31.12.94.], the only relevant coordination is that  produced between the parents as a result of the creation of the TBT. Even if TDK and Telenor do  subsequently distribute Concert in Denmark and Norway, it cannot be considered that the mere  existence of the TBT joint venture will act in any significant manner as an incremental instrument  for coordinating the parents' behaviour in the sale of Concert services beyond that which is already  inherent in the relationship between an exclusive distributor and its sub-distributors.  <ind> B<tab> Activities outside the scope of the joint venture 30.<ind> The parents will retain the possibility to engage in certain activities in Sweden. These are  covered by a specific exception to the general non-compete clause. In particular, BT and Telenor will  retain their equipment supply activities in Sweden (estimated 1996 turnover approximately ECU  [Deleted business secret.] million). However, these will have no significant interaction with the joint  venture's telecommunications services activities and therefore do not increase the likelihood of co- ordination between BT and Telenor. More generally, the parents will retain in-flight  telecommunications activities (BT) as well as distribution of satellite TV programmes in Sweden  (Tele Danmark and Telenor) as well as systems integration and data processing. These also have no  significant interaction with the joint venture's activities. 31.<ind> The parents will also remain active in the field of correspondent services for the provision  of the B-end of international calls [See paragraph 22 above.] originating in Sweden, which in the  case of calls to Denmark and Norway must of necessity be currently provided by TDK and Telenor.  Consequently there is no scope for increased co-ordination between the parents on the basis of these  activities. <ind> C<tab> Conclusion 32.<ind> In this light, there are no grounds to consider that the establishment and operation of the  TBT joint venture will lead to the coordination of the competitive behaviour of independent  undertakings, falling within the meaning of Article 3(2), second sub-paragraph of the Merger  Regulation. 33.<ind> Thus, the notified operation constitutes a concentration within the terms of Article 3 of the  Merger Regulation. <ind> V.<ind> COMPATIBILITY WITH THE COMMON MARKET <ind> Relevant Product Market 34.<ind> The parties have identified the relevant product markets as domestic and international,  voice and data telecommunication services and enhanced global telecommunications (eg Concert  services). As regards segmentation, the parties have drawn a distinction between the voice and data  markets, the latter being primarily used by business whereas both private households and business  participate in the former. In addition, voice and data markets may be further split into domestic and  international segments. The precise relevant product market delimitation can be left open since even  on the narrowest possible basis ie four separate relevant product markets, the proposed concentration  does not give rise to the creation or strengthening of a dominant position.  <ind> Geographical Reference Market 35.<ind> Having regard to the licensing, regulatory and supervisory framework, current market  participants and their market shares, as well as the physical interconnection arrangements for  telecom operators, the geographical reference market for domestic and international, voice and data  telecommunication services in Sweden can be considered to be at least national.  36.<ind> The geographical reference market for enhanced global telecommunications is to be  considered worldwide for the reasons already indicated above. <ind> Competitive assessment 37.<ind> The markets for telecommunications services are evolving very rapidly as a result of  technical change and liberalisation of the regulatory environment. Sweden (along with the UK) has  one of the most liberalised telecommunications regulatory regimes in Europe. This has led to a  number of overseas telecommunications companies setting up operations in Sweden to take  advantage of this regime. Nevertheless, despite the establishment of these competitors, the state  owned national telecom operator -Telia- still enjoys an overwhelming market share for the voice  market (90% according to the parties) and a strong market share in data communications (70% of  which 20% is achieved through its joint venture, Unisource). 38.<ind> In comparison, the market share acquired by new entrants has been relatively small -none  has a market share exceeding [all figures between 0 and 5%.] for either voice or data. AT&T  Nordics - the Swedish subsidiary of AT&T established in 1985 - has a market share of less than [all  figures between 0 and 5%.] for voice, BT's existing Swedish subsidiary has less than [all figures  between 0 and 5%.] of voice and less than [all figures between 0 and 5%.] of data whilst Tele2 (the  only Swedish operator apart from Telia to hold a Recognised Private Operating Agency status) has  secured a market share of only [all figures between 0 and 5%.] of voice and [all figures between 0  and 5%.] of data since its formation in 1991. 39.<ind> A detailed breakdown of the market shares of the parents in the four segments  corresponding to domestic and international, voice and data services is given in the Annex. The total  market share of the parties is significantly less than 15% in all segments. The thrust of the operation  is essentially pro-competitive. 40.<ind> With regard to enhanced global telecommunications, the combined market share of BT,  TDK and Telenor is also significantly less than 15%, even at the Community level. 41.<ind> For the above reasons, the concentration will not create or strengthen a dominant position  in the EEA territory or a substantial part of it. <ind> VI.<ind> ANCILLARY RESTRAINTS 42.<ind> The parties have expressly requested that the restrictions contained in Article 23(1) and (4)  of the Joint Venture and Shareholders' Agreement be considered as ancillary to the concentration. 43.<ind> The non-competition clause contained in Article 23(1) reflects the permanent withdrawal  of the parents from the markets to be served by the joint venture and can therefore be recognised as  an integral part of the concentration. 44.<ind> [Deleted business secret.] 45.<ind> [Deleted business secret.] <ind> VII.<ind> CONCLUSION 46.<ind> For the foregoing reasons, the proposed concentration does not raise serious doubts as to its  compatibility with the common market and with the functioning of the EEA Agreement. For the Commission, Annex Market Share of the Parties in the domestic and international, voice and data telecommunications  services in Sweden 1994 MECU <tab> Market <tab> BT Mkt. share <tab> TDK Mkt. share <tab> Telenor Mkt. share  <tab> Total Mkt. share Voice Domestic <tab> 2077 <tab> [...] <tab> [...] <tab> [...] <tab> [...] Internation'l <tab> 330 <tab> [...] <tab> [...] <tab> [...] <tab> [...] Tot. Voice <tab> 2407 <tab> [...] <tab> [...] <tab> [...] <tab> [...] Data Domestic <tab> 158 <tab> [...] <tab> [...] <tab> [...] <tab> [...] Internation'l <tab> 24 <tab> [...] <tab> [...] <tab> [...] <tab> [...] Tot. Data <tab> 182 <tab> [...] <tab> [...] <tab> [...] <tab> [...] TOTAL <tab> 2589 <tab> [...] <tab> [...] <tab> [...] <tab> [...] [] = Deleted business secrets, all figures less than 15%. Note:<ind> International data includes both ordinary and enhanced data services