Mergers: Commission clears Vodafone’s acquisition of Liberty Global’s cable business in Czechia, Germany, Hungary and Romania, subject to conditions

vodafone

(Fabian Albert, Unsplash)

This article is brought to you in association with the European Commission.


The European Commission has approved, under the EU Merger Regulation, the proposed acquisition by Vodafone of Liberty Global’s cable business in Czechia, Germany, Hungary and Romania. The approval is conditional on full compliance with a commitments package offered by Vodafone.

Commissioner Margrethe Vestager, in charge of competition policy, said: “In our modern society access to affordable and good quality broadband and TV services is almost as asked for as running water. We have today approved Vodafone’s purchase of Liberty Global’s business in Czechia, Germany, Hungary and Romania subject to remedies designed to ensure that customers will continue enjoying fair prices, high-quality services and innovative products.”

Today’s decision follows an in-depth investigation of the proposed transaction. This involves the acquisition by Vodafone of Liberty Global’s business in Czechia, Hungary, Romania and Germany, primarily focusing on the operation of cable networks.

The Commission’s investigation

During its in-depth investigation, the Commission gathered extensive information and received feedback from customers, suppliers and competitors of the merging companies, as well as from other stakeholders.

Following its investigation, the Commission had concerns that, in Germany, the transaction:

  • Would eliminate the important competitive constraint exerted by the merging companies on each other in the market for the retail supply of fixed broadband services, in particular in the areas currently served by Liberty Global’s subsidiary (Unitymedia). While both Vodafone and Unitymedia offer broadband services based on their own cable networks, these networks do not overlap. However, Vodafone is also active in the supply of fixed broadband services in the areas served by Unitymedia, via wholesale access to Deutsche Telekom’s network.
  • Would increase themarket power of the merged entityin the market for the wholesale supply of signal for the transmission of TV channels.This could hinder the broadcasters’ position, leading to quality degradation of the TV offer to final viewers in Germany. In addition, the increased market power of the merged entity could hinder the broadcasters’ ability to provide additional, innovative services. This would include streaming media distributed directly over the internet (known as “Over-The-Top” or “OTT” services) and advanced functionalities, such as interactive services, via Hybrid Broadcast Broadband TV-signals (also known as “HbbTV”).

Following its investigation, the Commission did not find competition concerns regarding:

  • The effects of the merger on the level of prices or quality in any of the retail TV markets in Germany, because the merging companies are mainly active within their respective cable areas. The Commission found no evidence of a loss of direct, indirect or potential competition as a result of the transaction.
  • The possibility that the merger would reduce investments in next generation networks in Germany, since the transaction will not reduce the ability and incentive of the merged entity to invest.
  • The retail market for fixed broadband services, retail TV services and retail mobile telecommunications services in Czechia. The Commission found that the merged entity would have neither the ability nor the incentive to shut out standalone providers of fixed or mobile telecommunications services.
  • Any other market in Germany or Czechia.
  • Hungary or Romania.

The proposed remedies

To address the Commission’s competition concerns, Vodafone offered the following commitments:

  • To provide a remedy taker – already identified by Vodafone as Telefónica – with access to the merged entity’s cable network in Germany. This commitment would enable the remedy taker to replicate the competitive constraint exerted by Vodafone, which would be lost as a result of the merger, and to compete more effectively in the provision of fixed broadband services in Germany. In addition, the remedy would allow the remedy taker to offer TV services. The monitoring of this commitment will benefit from the advisory role of BNetzA, the German telecommunications regulator, in particular with regard to the German regulatory framework for telecommunications.
  • To refrain from contractually restricting, directly or indirectly, the possibility for broadcasters that are carried on the merged entity’s TV platform to also distribute their content via an OTT service. This commitment counterbalances the increased market power of the merged entity vis-à-vis TV broadcasters and eliminates the concern that the merged entity could hinder the broadcasters’ ability to provide additional, innovative services through OTT services.
  • Not to increase the feed-in fees paid by Free-to-Air broadcasters for the transmission of their linear TV channels via Vodafone’s cable network in Germany by extending the existing agreements (or, where needed, by entering into new agreements). This commitment addresses the concern related to the merged entity’s ability to reduce the breadth and the quality of the Free-to-Air TV offer to retail customers.
  • To continue to carry the HbbTV signal of Free-to-Air broadcasters, which allows TV customers to be directly connected to the broadcasters’ interactive services. This commitment eliminates the concern that the merged entity could hinder the broadcasters’ ability to provide additional and innovative services through HbbTV signal.

The Commission therefore concluded that the transaction, as modified by the commitments, would no longer raise competition concerns. This decision is conditional upon the full compliance with the commitments.

Companies and products

Vodafone, based in the UK, is primarily involved in the operation of mobile telecommunications networks and in the provision of mobile telecommunications services, such as mobile voice, messaging and data services. Some of its operating companies also provide cable television, fixed line telephony, broadband internet access and/or IPTV services. Within the EU, Vodafone is active in twelve Member States, including Czechia, Germany, Hungary and Romania.

Liberty Global, based in the UK, offers television, broadband internet, fixed telephony services as well as mobile services in various EU countries. Liberty Global owns and operates cable networks offering TV, broadband and voice telephony services in Czechia, Germany, Hungary and Romania. In Germany and Hungary, Liberty Global also provides mobile telecommunications services as a mobile virtual network operator. Liberty Global operates under the name Unitymedia in Germany and under the name UPC in Czechia, Hungary and Romania.

Merger control rules and procedures

The transaction was notified to the Commission on 19 October 2018 and the Commission opened an in-depth investigation on 11 December 2018.

The Commission has the duty to assess mergers and acquisitions involving companies with a turnover above certain thresholds (see Article 1 of the Merger Regulation) and to prevent concentrations that would significantly impede effective competition in the EEA or any substantial part of it.

The vast majority of notified mergers do not pose competition problems and are cleared after a routine review. From the moment a transaction is notified, the Commission generally has a total of 25 working days to decide whether to grant approval (Phase I) or to start an in-depth investigation (Phase II).

There are currently three on-going phase II merger investigations: the proposed acquisition of Bonnier Broadcasting by Telia Company, the proposed acquisition of Aleris by Novelis and the proposed acquisition of Innogy by E.ON.

More information will be available on the Commission’s competitionwebsite, in the public case registerunder the case number M.8864.

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