CELEX: 31995M0544
Language: en
Date: 1995-11-06 00:00:00
Title: COMMISSION DECISION of 06/11/1995 declaring a concentration to be compatible with the common market (Case No IV/M.544 - Unisource / Telefonica) according to Council Regulation (EEC) No 4064/89 (Only the English text is authentic)

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31995M0544

COMMISSION DECISION of 06/11/1995 declaring a concentration to be compatible with the common market (Case No IV/M.544 - Unisource / Telefonica) according to Council Regulation (EEC) No 4064/89 (Only the English text is authentic)  

Official Journal C 013 , 18/01/1996 P. 0003

 COMMISSION  DECISION of 06/11/1995 declaring a concentration to be compatible with the common market (Case No IV/M.544  - Unisource  /  Telefonica) 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)(a) DECISION To the notifying parties Dear Sirs, Subject :<ind> Case No IV/M.544  Unisource/Telefónica <ind> <ind> Notification of 29.09.1995 pursuant to Article 4 of Council Regulation No 4064/89 1.<ind> Unisource International NV (Unisource International) is a proposed joint venture between Unisource NV (Unisource) on  the  one  hand,  a  company whose shareholders  are  PTT Telecom   BV   (the   monopoly  telecom  operator   in   the Netherlands),  Telia AB (the main Swedish telecom  operator) and   Swiss   PTT   (the   monopoly  telecom   operator   in Switzerland), and Telefónica, the Spanish telecom  operator, on  the other hand. The intention of the parties is to  pool their  experience, business and efforts in certain  business areas,   mainly   valueadded   telecom   services.     After examination   of   the  notification,  the  Commission   has concluded  that  the notified operation  falls  outwith  the scope of application of Council Regulation n° 4064/89. I.<ind> THE PARTIES 2.<ind> Telefónica is the public telecommunications operator in  Spain  and  is  engaged directly  and/or  indirectly  in national  and international telecommunications networks  and services. 3.<ind>  The current structure of Unisource was  created  in 1993 when Swiss PTT joined with PTT Telecom and Telia. There had  been an earlier agreement between Telia and PTT Telecom to  pool  their  satellite services and later  to  create  a international  data communications company. The  company  is arranged  into  a  number  of  different  subsidiaries   for specific service activities. These are: <ind>  <ind>  Unisource Business Networks  (UBN)  which  has 1,208 employees and a turnover in 1994 of 388 MEcu; <ind>  <ind> Unisource Voice Services (UVS) a business  unit of UBN which offers voice services to multinational business customers.  It represents 60/80 employees and a turnover  of 0.2 MEcu (est. 1994); <ind>  <ind> Unisource Satellite Services (USS) a subsidiary offering  international  satellite  services.  It   has   25 employees and a turnover of 5.6 MEcu (est. 1991); <ind>  <ind>  Unisource  Card  Services  (UC)  a  subsidiary offering  personal  and  corporate  postpaid  calling   card services. It represents 13 employees and a turnover  of  3.9 MEcu (est. 1994); <ind>  <ind>  Unisource  Mobile (UM) a  subsidiary  offering mobile  services (provision + acquisition of  licences).  It represents  236 employees and a turnover of 0.8  MEcu  (est. 1994); <ind>  <ind>  Unisource Carrier Services (UCS) a  subsidiary dealing   with  synergies  in  international  networks.   It represents  70 employees and a turnover of 5.76  MEcu  (est. 1994); <ind> <ind> ITEMA is a subsidiary the prime mission of which is to strengthen the ability of the EDP organisations of the Unisource shareholders to provide improved functionality and quality of ITservices at lower cost for internal use. II.<tab> THE OPERATION 4.<ind>  The Unisource International shareholders will  pool some  of  their businesses in value added telecom  services. Telefónica  will  contribute its  satellite  services  (VSAT very  small  aperture  terminal)  business.  Unisource  will contribute UCS, ITEMA, UM, UC, the UVS business unit of  UBN and  USS. Unisource will also contribute UBN BV the  holding company  of the data communications businesses but  not  the domestic subsidiaries where the business is carried out. III.<ind> ABSENCE OF CONCENTRATION <ind> A.<ind> JOINT CONTROL/ABSENCE OF JOINT CONTROL 5.<ind>  Unisource International will be  jointly  owned  by Unisource   (75%)  and  Telefónica  (25%).   The   Unisource shareholding  will be known as the A shares  and  Telefónica will hold the D shares.  6.<ind> The Unisource International structure of control  is the following : <ind> 1)<ind> The Supervisory Board 7.<ind>  <ind>  The  General Meeting  of  shareholders  will appoint a Supervisory Board which shall exercise supervision over  the  Management  Board,  in  charge  of  the  daytoday business  of  Unisource International and over  the  general course of business in the joint venture. 8.<ind> <ind> The Supervisory Board will be composed  of  12 members  appointed  by the shareholders :  9  for  Unisource (divided  into  3 foreach of PTT Telecom (the A  directors), Telia (the B directors) and Swiss PTT (the C directors)) and 3  for  Telefónica (the D directors). The board will have  a chairman  and  three vicechairmen, each of them representing one of the four telecommunications companies. 9.<ind> <ind> All resolutions of the Supervisory Board  will be  adopted by unanimity of the votes cast. However, as  far as   budget   and  business  plan  related   to   the   data communications  business  are  concerned,  it  is  expressly stated in article 12 of the shareholders' agreement that : <ind>  <ind> <ind> the UBN budget and business plan will  be adopted  by the vote of the Supervisory Board members  A,  B and C (who represent Unisource); <ind>  <ind>  <ind> the Telematica budget and business  plan will be adopted by the vote of the Supervisory Board members D (who represent Telefónica). 10.<ind> <ind> This means that the two parent companies will decide separately on two key issues (budget + business plan) related  to  the  data communication business  of  Unisource International.  Moreover,  there  is  no  provision  in  the agreements that allow Unisource to impose its conditions  on Telefónica  on these issues. There is, therefore,  no  joint control   at  the  Supervisory  Board  level  of   Unisource International for its data communications activities.  There is  joint  control  only  for the  remaining  activities  of Unisource International. <ind> 2)<ind> The Management Board 11.<ind> <ind> The Management Board will be appointed by the General Meeting of shareholders and will be the same as  the management  board  of  Unisource.  Telefónica  will  not  be represented at this level as a result of the operation.  The Management  Board  will  be  entrusted  with  the   daytoday business of Unisource International. 12.<ind>  <ind> Although there is no transfer of assets  and no  joint control as far as data communications business  is concerned,  the  parties  have  entered  into  a  management agreement in which it is agreed that Unisource International will  coordinate the responsibility for the  management  and operations  of the domestic UBN subsidiaries and  Telematica in   order  to  avoid  duplications  of  resources  and   to coordinate  services development in the data  communications business  area.  This  coordination  achieved  through   the Management Board of Unisource International does not  amount to joint control as explained above, in paragraph 10. <ind> Conclusion 13.<ind>  In  the light of the above information,  Unisource International will only be jointly controlled  for  the  non data  communications areas of the business.  As  the  parent companies   retain  separate  arrangements  for   the   data communications  businesses, they are not jointly  controlled notwithstanding  the  coordination  of  daytoday  management which is mentioned in the previous paragraph.  <ind>  B.<ind>  FULL  FUNCTION  JOINT  VENTURE/NOT  A   FULL FUNCTION JOINT VENTURE 14.<ind> As it is stated above Unisource International  will receive  from  both  shareholders  their  satellite  service businesses and from Unisource, UCS, ITEMA, UM, UC,  the  UVS business  unit  of  UBN,  USS  and  UBN  BV.   The  domestic subsidiaries of UBN BV will not be contributed to  Unisource International. 15.<ind> Unisource Carrier Service (UCS) is a subsidiary  of Unisource which has been set up to exploit synergies in  the international  networks  of  the Unisource  shareholders  in order  to  reduce  costs. Under the  national  laws  of  The Netherlands, Switzerland and Spain, PTT Telecom,  Swiss  PTT and  Telefónica respectively are not presently permitted  to assign   their   international  networks  and  corresponding licences to UCS. Consequently, in the current situation, UCS will  only perform the role of a management company for  the international   networks  of  the  Unisource   International shareholders  themselves and not as Unisource International. Accordingly, the activities of UCS are not full function and therefore fall outside the scope of the Merger Regulation. 16.<ind>  The  primary activity of ITEMA  (which  is  to  be renamed Unisource Information Services) is to strengthen the IT  operations  of the Unisource shareholders  in  order  to improve  quality and reduce costs for the shareholders.  Its secondary  objective is to offer integrated IT solutions  on the  market. Most of the resources of ITEMA are hired  on  a secondment  basis  from the Unisource shareholders.  On  the basis  that the primary purpose of the companyis to  provide services  to  the Unisource parents, and that  most  of  the resources  are provided by the parents, ITEMA is  not  in  a position to act as an autonomous economic entity and  cannot therefore  be  considered  as a full  function  entity.  Its operations  therefore fall outside the scope of  the  Merger Regulation. <ind> C.<ind> RISK OF COORDINATION OF COMPETITIVE BEHAVIOUR 17.<ind>  For those activities which are jointly  controlled and  are  full  function  it  is  necessary  to  assess  the likelihood of coordination of competitive behaviour  between Unisource and Telefónica. <ind> Mobile telephony 18.<ind>  Unisource Mobile (UM), a subsidiary of  Unisource, specialises  in mobile service provision, is transferred  to the   joint   venture.   The  Unisource   shareholders   and Telefónica,  through its 100% subsidiary Telefónica  Mobile, retain  their domestic services. [Deleted business  secret.] According  to the parties, UM is active as a mobile  service provider outside the countries of the Unisource shareholders where  each  of  them  remains active on  its  own  account. However, Unisource has no licence on its own account in  any country.   The   parent  companies  are  investigating   the possibility  of transferring their licences to Unisource  in their  territories. A noncompetition agreement  between  the four   shareholders  states  that  they  will  limit   their offerings  of  their  national  mobile  services  to   their respective  national markets only. In 1994,  UM  acquired  a retail organisation in Sweden for mobile equipment (GEAB). 19.<ind>  UM will be a GSM network operator as are  each  of the parent companies in their own territory. One of the most important  characteristics of  a  GSM  network  is  that  it enables  the consumer to use the mobile phone widely  across Europe  as  a consequence of roaming agreements between  the different network operators. It is only the availability  of roaming agreements that affects the consumer's use of mobile phones  regardless of the country in which the  subscription is taken out. This integration of previously national mobile phone markets is occurring quickly and an indication of this is  the  existence  of mobile operators independent  of  the national   telecommunications  network   provider   offering services to consumers irrespective of location. 20.<ind>  In  addition, as UM has no  licence  yet,  UM  may acquire  a  licence  from Telefónica  or  from  one  of  the shareholders  of  Unisource since nothing prevents  it  from doing so and indeed the parent companies are exploring  this possibility. In that event, the parent companies may have  a strong interest in not competing with each other. 21.<ind> In the light of the above, and on the basis of  the Omnitel  decision  [Case No IV/M.538  Omnitel  of  27  March 1995.],  it  is clear that this operation will increase  the likelihood  for Unisource, Telefónica and the  three  parent companies of Unisource: PTT Telecom, Telia and Swiss PTT  to coordinate  their activities in the provision of GSM  mobile telephone services through Unisource International.  Because the  shareholders  of Unisource International  retain  their domestic services, they remain potential competitors, mainly within  the framework of the roaming agreements as explained above.   The  creation of Unisource International  does  not remove  this  likelihood of competition between  the  parent companies.  The non competition agreement for the non parent company  territories shows the nonwithdrawal of  the  parent companies  from  their  domestic  markets  rather   than   a longlasting withdrawal from the joint venture market. <ind> Card services 22.<ind>  Unisource Card Services (UC) is  a  subsidiary  of Unisource,  which  specialises  in  personal  and  corporate postpaid  calling  card services. This  subsidiary  will  be transferred   to  Unisource  International.  The   Unisource shareholders and Telefónica currently offer postpaid calling cards in their respective territories. UC calling cards  are only  offered to customers who live outside shareholder home countries and Spain. 23.<ind>   However,  a  subscriber  of  any  of   the   four shareholders' card may use his card (or several cards of the different  shareholders or of UC) all  over  Europe  to  the extent  that the service provider has got freephone  numbers in the different states. The availability of these freephone numbers  is  therefore the only constraint to  the  European wide use of calling cards in a similar manner to the roaming agreements  in  the mobile phone sector as mentioned  above. Because  they  remain  active in their  respective  domestic territories,parent companies may have therefore an  interest in  not  competing  with  the joint  venture  or  with  each another.   In   that  respect,  there  is  a  noncompetition agreement between the four shareholders limited to marketing and  distribution in respective national markets and in  the UC  territory.   As for mobile services, this noncompetition agreement  shows that the parent companies remain  potential competitors from their respective domestic territories. <ind> Voice services 24.<ind>  Unisource Voice Services (UVS) is a business  unit of  UBN.  However,  as the areas which are  covered  by  the special  separate voting arrangements referred to above  are confined  to  the  UBN Budget and Business  Plan  (which  is clearly  defined  as  the activities  of  the  domestic  UBN subsidiaries)   these  arrangements  do   not   cover   UVS. Therefore,  UVS is subject to the joint control arrangements which  apply to the nonUBN and Telematica areas of the joint venture. 25.<ind>  UVS  offers International Virtual Private  Network services and other closed user group services on an European basis.  According to the parties, 40% of its purchases  were from the parent companies in 1994. Unisource is a partner in WorldPartners and is the continental European member of that grouping.  This arrangement has been notified under  Article 85.  In  the  home  territories  of  the  shareholders,  UVS services   are   distributed  by  the   relevant   Unisource shareholder   whilst   distribution   outside   the   parent companies' home territories in carried out by the local  UBN subsidiary. 26.<ind>  The market for IVPN services is at least  European and  possibly  global. The demands of a  customer  for  IVPN services will determine which provider they will look to  to provide the service. Depending on the company's location  in different countries, the solution may be achievable  through means than other than a European or global service provider. National  telecommunications operators may be able to  offer comparable  services on a bilateral basis by  entering  into bilateral  agreements  with  the  national  public   network provider.  Therefore,  a  company may  look  to  the  parent companies  as  well as to other providers such as  Unisource International for these services. Because they remain active in  their  respective domestic territory, the  parents  will therefore   have  an  incentive  to  coordinate  competitive behaviour     between    themselves    through     Unisource International. In addition, the parent companies will  be  a supplier  of capacity to Unisource International for  leased lines  in their home territories and even abroad. This  will further increase the scope for coordination. <ind> Satellite services 27.<ind>  Unisource  Satellite Services (USS)  offers  value added  communications  services  using  satellite  terminals based on VSAT technology. According to the parties, prior to the  establishment  of  USS  the Unisource  parents  had  no satellite services of their own. After the transaction,  the shareholders  of  Unisource  International  will   have   no comparable  VSAT services outside their respective  national markets  as  a result of a noncompetition agreement  between the  parents  of  Unisource  International.  In  the  parent companies'   home   territories,  USS   services   will   be distributed by the parents themselves, elsewhere  in  Europe by  the  appropriate  UBN  national subsidiary  and  through distribution  agreements  in  countries  where  UBN  has  no presence. 28.<ind>  VSAT  technology is used  where  fixed  links  are impractical  or uneconomic or where there is a poor  quality existing  infrastructure. It can also  be  used  instead  of fixed lines in certain circumstances and is used in that way by  companies  with  widespread distribution  networks.  USS targets at business customers in the automotive, banking and finance sectors as well as government, transport and  retail operations and customers in Eastern Europe. 29.<ind> The noncompetition agreement between Unisource  and Telefónica covering VSAT services provides that the  parents will  distribute the VSAT services in their territories  and will  not  offer a parallel product portfolio  to  Unisource International.  This represents an effective  withdrawal  by the  parents  from  VSAT activities. Though  there  is  some overlap  with  services provided through fixed  lines,  VSAT services can be considered as a distinct product segment  in their own right. Accordingly, there is no likelihood of  the coordination  of competitive behaviour in the  provision  of VSAT services between Unisource and Telefónica. <ind> Conclusion on likelihood of coordination 30.<ind> In conclusion, therefore, there is a likelihood  of coordination  of  competitive behaviour between  the  parent companies  in the fields of mobile telephony, card  services and  voice  telephony  but  not in  the  area  of  satellite services.  In the light of this information and taking  into account  the notice on the distinction between concentrative and  cooperative  joint ventures [OJ C 385  of  31.12.1994.] (and  in particular paragraph 20 second subparagraph), there is  a  likelihood  of coordination of competitive  behaviour between  the parent companies as a result of the  operation. The  notified  operation cannot be therefore regarded  as  a concentration as such. <ind> CONCLUSION ON ABSENCE OF CONCENTRATION 31.<ind>  For the above reasons the Commission has concluded that   the   notified  operation  does  not   constitute   a concentration  within the meaning of  Article  3(2)  of  the Merger Regulation and consequently does not fall within  the scope  of  this  Regulation. This  decision  is  adopted  in application  of  Article 6(1)(a) of Council  Regulation  No. 4064/89. 32.<ind> The Commission will treat the notification pursuant to  Article  5  of Commission Regulation No  2367/90  as  an application   within  the  meaning  of  Article   2   or   a notification  within  the meaning of Article  4  of  Council Regulation  17/62  as  requested by  the  parties  in  their notification. For the Commission,