Commission Decision of 22/12/2005 declaring a concentration to be compatible with the common market (Case No IV/M.4034 - TELENOR / VODAFONE SVERIGE) according to Council Regulation (EEC) No 4064/89 (Only the English text is authentic) | |Brussels, 22.12.2005 SG-Greffe(2005) D/207637 [pic] To the notifying party : Dear Sir/Madam, Subject : Case No COMP/M.4034 – Telenor/Vodafone Sverige Notification of 17 November 2005 pursuant to Article 4 of Council Regulation No 139/2004[1] I. Introduction 1. On 17/11/2005, the Commission received a notification of a proposed concentration pursuant to Article 4 of Council Regulation (EC) No 139/2004 by which the undertaking Telenor ASA (“Telenor”, Norway) acquires within the meaning of Article 3(1)(b) of the Council Regulation control of the whole of the undertaking Europolitan Vodafone AB (which includes Vodafone Sverige AB, “Vodafone Sverige”, Sweden) by way of purchase of shares.
II. THE PARTIES 2. Telenor is the Norwegian incumbent telecommunications operator. It is the largest fixed and mobile telecommunications provider in Norway. Telenor also provides mobile telecommunications services in Denmark (via its local subsidiary Sonofon), Sweden (via its local subsidiary Djuice), Hungary (via its local subsidiary Panafon) and in other non-EEA countries. Telenor is controlled by the Norwegian State. 3. Vodafone Sverige is the third largest mobile operator in Sweden. It does not have operations outside Sweden. Vodafone Sverige is an indirect wholly-owned subsidiary of Vodafone Group plc.
III. THE CONCENTRATION 4. On 31.10.2005, Telenor and Vodafone Group plc entered into a sale and purchase agreement for the acquisition by Telenor of Vodafone Sverige. Under this agreement, Telenor will acquire sole control of Europolitan Vodafone AB (which includes Vodafone Sverige AB). The proposed transaction is therefore a concentration within the meaning of Article 3 of the Merger Regulation. IV. Community dimension 5. The combined aggregate worldwide turnover of Telenor (€7,776 million) and Europolitan Vodafone AB (€[…] million) exceeded €5,000 million in 2004[2], and each of the undertakings had turnover in the Community of more than €250 million (Telenor €[…] million, Vodafone Sverige €[…] million) without achieving more than two-thirds of their respective aggregate Community-wide turnover within one and the same Member State.
The transaction is therefore a concentration with a Community dimension. V. Competitive assessment A. Relevant markets 6. The relevant markets potentially affected by the transaction are the following: retail mobile telecommunications, pan-Nordic retail mobile telecommunications services, wholesale international roaming and call termination on fixed and mobile networks. Access and call origination on public mobile telephone networks is not an affected market as Telenor and Vodafone Sverige are not mobile network operators in the same countries. A.1 Relevant retail markets Retail mobile telecommunications market 7.
The parties consider the retail market for mobile services to comprise private and business customer access to second generation (2G: GSM900 and GSM1800) and third generation (3G: UMTS) mobile networks with no need to segment into business and residential, pre-pay and post pay or voice and data segments. They motivate their position by the fact that all network operators offer a full range of services and each of the three 2G network operators in Sweden offers UMTS services. The Commission case-law has, up to date, left the question of sub-segmentation open[3]. It is not necessary in the present case to precisely define the markets involved as the competitive assessment would remain unchanged whatever the delineation under consideration.
8. From a geographic point of view, the parties define a national market (each Member State having its own licensing and frequency allocation regime; and specifically for Sweden, 97% of calls in Sweden on GSM and UMTS phones are national). The Commission agrees with this delineation which is in line with previous decisions[4]. Pan-Nordic mobile telecommunications services 9. Telenor, who considers the geographic market for mobile services to be national, does not consider pan-Nordic mobile telecommunications services to end-users to constitute a relevant market. In 2004, the Commission examined whether a distinct market for mobile telecommunications services to pan-Nordic business customers exists.
Based on the findings that these services were all provided on a national basis, it concluded that such a distinct market did not yet exist at that time[5].. The market investigation in the present case evidenced that there is a growing interest from large companies with operations in the Nordic countries for the procurement of mobile telecommunication services on a pan-Nordic basis. 10. For the purposes of the present case, the question whether it already exists a distinct market for the provision of pan-Nordic mobile telecommunications services to large corporate customers can be left open as the proposed transaction does not raise competitive concerns on such a market.
A.2 Relevant wholesale markets Wholesale international roaming 11. International roaming services enable customers travelling abroad to give and receive calls with their cell phones. Wholesale international roaming services are thus provided by a domestic mobile network operator (visited network) to a foreign mobile operator (home network). In order to provide such services, home network operators have to engage in agreement with network operators of the visited countries. Usually, operators engaged in bilateral agreements with all operators of other countries. 12. International roaming traffic has traditionally gone through any available operator’s network but now operators can increasingly choose the network on which their clients roam out of their home country.
This can be done through an OTA-enabled[6] SIM card in the phone of the customer or on a network-based technology (Home Location router LHR) to select the home operator’s preferred network. There are currently a minority of SIM cards configured and the LHR technology has only come into use in the past year. The notifying party explains that both Telenor and Vodafone Sverige can technically steer roaming traffic into a selected network. Telenor states this ability to manage redirection of roaming traffic will increase as the technology becomes more refined. 13. In a number of cases, the Commission identified a relevant market for the provision of wholesale international roaming to foreign network operators[7].
In the present case, the provision of wholesale international roaming services is to be considered as a relevant market. The geographic market is considered to be essentially national because of regulatory barriers according to which authorisations to operate a mobile network are only granted for territories which are not wider than national. Mobile networks normally provide national coverage and the scope of the wholesale offer for international roaming is thus national. Call termination 14. Call termination consists of the service offered by a network operator to another operator to terminate traffic originating on another network.
Termination services allow thus users of the different networks to communicate with each other. Each operator has to procure call termination at wholesale level in order to be able to terminate calls on other networks. Call termination is indispensable in order to complete a call to its recipient when the call originates from another network than that of the recipient. Call termination is therefore a wholesale service that is resold or used as an input for the provision of downstream services. 15. The Commission has identified a relevant market for the provision of wholesale call termination services on public fixed and mobile networks[8].
As there is no substitute for call termination on each individual network (an end-customer on a given network can only be reached by terminating the call on that specific network), each termination access network constitutes a relevant market. The geographic market is considered to be essentially national for the same reasons as those explained above for the wholesale international roaming market (authorisations to operate a network only granted for territories which are not wider than national and national coverage of the mobile networks). B . Competitive assessment B.1 Non-coordinated effects B.1.1.
Retail markets Retail mobile telecommunications market in Sweden Norway | 8% | 7% | 13% | Sweden | 12% | 9% | 10% | Annual mobile traffic growth rate[35] | 2002 | 2003 | 2004 | Norway | 17% | 15% | 19% | Sweden | 14% | 7% | 13% | 22. The traffic on mobile networks in Norway and Sweden is expected to continue to grow at a significant rate over the next years as customers are increasingly migrating from fixed to mobile telephony. The fixed to mobile voice migration has so far been slower in Norway and Sweden than in Finland. The mobile share of voice traffic in 2004 was 21% in Sweden and 31% in Norway compared to 53% in Finland.
In addition, the recent launch of 3G services in Norway and Sweden should contribute to an additional increase of mobile traffic in both countries. 23. Third, mobile markets are characterised by a high level of technological change as a result of the roll-out of 3G networks and the recent launch of 3G services by Telenor and TeliaSonera in Norway and Vodafone Sverige, Tele2, “3” and TeliaSonera in Sweden. This technological change creates market uncertainty and strong incentives to compete. Indeed, all these operators have sunk huge investments in the roll-out of 3G networks that will only be recouped if their 3G customer base sharply increases in the coming years.
As 3G services are much more sophisticated than 2G services, pricing models and levels that will prevail in the future are still unknown. 24. Fourth, the Norwegian and Swedish retail mobile markets exhibit a low level of transparency as regards at least the business segment of the market. The market investigation confirmed that corporate customers negotiate discounts off public tariffs. As corporate customers account for a significant share of retail sales of mobile services[36], this means that real prices are unknown to competitors for a substantial segment of the market. 25. Fifth, there are other players (in particular Tele2 and “3”) which would undermine any attempt by the Telenor and TeliaSonera to coordinate in Sweden.
As indicated both Tele2 and “3” are 3G network operators with strong incentives to compete. In addition, “3” is a new entrant whose current market share does not accurately reflect its competitive strength[37]. As any attempt by Telenor and TeliaSonera to coordinate would be undermined by outsiders in Sweden, it is unlikely that these two companies start coordinating in Norway as a result of the proposed transaction. 26. For the reasons stated above, it does not appear that the proposed transaction will increase the likelihood that a consensus between Telenor and TeliaSonera to implement a coordinated anticompetitive strategy could be reached and sustained over time in Norway and in Sweden.
For the same reasons, it is very unlikely that such a coordinated strategy would include Tele2. In addition, it is more difficult for three players than it is for two to implement and sustain a coordinated strategy over time. 27. Finally the Commission assessed whether the proposed transaction could lead to modifying the current incentives of the largest mobile operators (Telenor, TeliaSonera Tele2 and TDC) to compete against each others in the Nordic countries[38]. In this respect it should be outlined that there is no change brought about by the proposed transaction: TeliaSonera will remain the largest player in Sweden and Finland, TDC the largest player in Denmark and Telenor the largest player in Norway.
In addition to the asymmetries at the national level, asymmetries are also strong at the Nordic level. Indeed, only TeliaSonera provides mobile services in all four Nordic countries as a network operator. By contrast Telenor provides mobile services in Norway, Denmark and Sweden (but not in Finland), TDC only in Denmark (and in Norway as an MVNO), and Tele2 only in Sweden (and in Denmark and Norway as an MVNO). 28. In light of the foregoing, it can be concluded that the proposed transaction will not significantly impede effective competition in the common market or in any substantial part of it or in the EEA.
VI. Conclusion 29. 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 EEA Agreement. This decision is adopted in application of Article 6(1)(b) of Council Regulation (EC) No 139/2004. For the Commission (signed) Neelie KROES Member of the Commission [1] OJ L 24, 29.1.2004 p. 1. [2] Turnover calculated in accordance with Article 5(1) of the Merger Regulation and the Commission Notice on the calculation of turnover (OJ C66, 2.3.1998, p25). [3] See for instance Case N COMP/M.3778 Vodafone/Oskar Mobile of 25/05/2005 and Case N COMP/M.3920 France Télécom/Amena of 24/10/2005. [4] See for instance Case N COMP/M.3778 Vodafone/Oskar Mobile of 25/05/2005 and Case N COMP/M.3920 France Télécom/Amena of 24/10/2005 [5] See Case N COMP/M3750 TeliaSonera AB/ Orange A/S of 24/09/2004. [6] Over-the-air technology allows SIM cards to be configured remotely. [7] See for instance Case N COMP/M.2803 Telia/Sonera of 10/07/2002.
See also Commission Recommendation of 11 February 2003 on relevant product and service markets within the electronic communications sector susceptible to ex ante regulation in accordance with Directive 2002/21/EC of European Parliament and of the Council on a common regulatory framework for electronic communication networks and services, OJ L 114, 8.5.2003, p. 45. [8] See inter alia Case N M.2803. See also Commission Recommendation of 11 February 2003 on relevant product and service markets within the electronic communications sector susceptible to ex ante regulation in accordance with Directive 2002/21/EC of European Parliament and of the Council on a common regulatory framework for electronic communication networks and services, OJ L 114, 8.5.2003, p.
45. [9] Source : Annual Report 2004 of the Swedish Telecommunications Regulator (PTS) and Telenor’s best estimates. [10] Mobile Virtual Network Operator. [11] [1 400 000-1 600 000] customers in 2004, [1 400 000-1 600 000] customers in 2005 [12] Through Telenor AB, Telenor owns a fixed telephony infrastructure that represents less than [0-5]% of all fixed lines in Sweden. [13] Telenor controls Bredbandsbolaget which holds a 20% share of the Internet broadband access market. [14] For instance, TeliaSonera holds a 43% share of the retail mobile market and a 40% share of the Internet broadband access market in Sweden. [15] Telenor controls Canal Digital Sverige which holds a [20-30]% share of the total pay-TV market in Sweden. [16] Tele2 provides fixed and mobile telephony services in Sweden.
It is also a cable operator providing pay-TV ([0-5]% share of the total pay-TV in Sweden) and Internet broadband access. In addition Tele2 is controlled by the Kinnevik Group which also controls Modern Times Group (MTG). MTG controls ViaSat, a DTH pay TV operator in Sweden ([10-20]% share of the total pay-TV in Sweden). Com Hem is a cable operator which provides pay TV ([10-20]% share of total pay-TV in Sweden), broadband Internet access and VoIP in Sweden. [17] Article 2.D.5 of the Framework Agreement. [18] Article 2.D.4 of the Framework Agreement […]. [19] Section 3-2 of Norwegian Regulation 1997-12-05 no 1259 regarding public telecommunications network and public telecommunications services.
Regulation 1997 no 1259 was repealed with the entering into force of the new Norwegian Electronic Communication Act no 83 of 4 July 2004. However, transitional arrangements (section 13-2 of the Electronic Communication Act and section 10-7 of the Electronic communication regulation of 2004/02/16 no 401) provide that all obligations imposed on SMP-operators by Regulation 1997 no 1259 remain in force until new decisions have been put in place under the new electronic communication framework. [20] Wholesale market for access and call origination on public mobile telephone networks under Article 7 of Directive 2002/21/EC. [21] […]. [22] This is a conservative approach as Tele2 customer’s base is predominantly composed of residential customers. [23] For the time being an overwhelming share of mobile traffic in Norway is on 2G networks. [24] Such as increasing the number of frequencies on one or more base stations, increasing the number of trunks between one or more pair of nodes in the core network, increasing the number of base stations or base stations controllers, number of switches, frequency re-planning. [25] TeliaSonera, Tele2, 3 and Vodafone Sverige have recently developed 3G networks that cover approximately 85% of the population (and 5% of the total subscriber base). [26] Annual Report 2004 of the Norwegian Telecommunications Regulator (PT). [27] TeliaSonera opened its 3G network in February 2005. [28] Chess was an independant service provider of mobile services on both Telenor’s and TeliaSonera’s networks.
It had a market share (in number of subscribers) of 8%. [29] In 2005 the MVNO Agreement provides revenues to Telenor of approximately NOK […] million. [30] Mobile Virtual Network Operator. [31] [10-20]% of Vodafone Sverige international roaming traffic in Denmark is already directed to Telenor Sonofon and [50-60]% of Vodafone Sverige international roaming traffic in Norway is already directed to Telenor Norway. [32] [10-20]% of Telenor international roaming traffic in Sweden is already directed to Vodafone Sverige. [10-20]% of Telenor/Sonofon international roaming traffic in Sweden is already directed to Vodafone Sverige. [33] Case N COMP/M.2803 – Telia/Sonera [34] Source :
Annual reports 2004 of the Norwegian and Swedish Telecommunications Regulators (PT and PTS) [35] Source: Annual Reports 2004 of the Norwegian and Swedish Telecommunications Regulators (PT and PTS) [36] Approximately [35-45]% in Sweden. [37] « 3 »entered the market in 2003. Its current market share by revenue is [5-15]% for the first semester of 2005 ([0-5]% in 2004). [38] Finland, Denmark, Norway and Sweden. PUBLIC VERSION MERGER PROCEDURE ARTICLE 6(1)(b) DECISION