Mergers: Commission clears acquisition of joint control over INWIT by Telecom Italia and Vodafone, subject to conditions

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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 of joint control over INWIT by Telecom Italia and Vodafone. The approval is conditional on full compliance with a commitments package offered by Telecom Italia and Vodafone.

Executive Vice-President Margrethe Vestager, in charge of competition policy, said: “Fast roll-out of 5G technology in Italy will benefit Italian consumers and businesses. Today we approve the creation of a joint venture between two mobile operators who are planning to combine their telecommunication towers to jointly achieve this objective, without compromising retail and wholesale competition.”

Telecom Italia and Vodafone are both active in the provision of mobile and fixed telecommunications services to consumers and businesses in Italy. INWIT is a joint venture which will bring together Telecom Italia’s and Vodafone Italia’s telecommunication towers located in Italy and will rent space on these towers mainly to telecommunication operators.

The Commission’s merger investigation

The Commission found that the proposed transaction, as originally notified, would have combined under the ownership of Telecom Italia and Vodafone a very large pool of towers. The Commission had concerns that this could:

• reduce competition in the market for renting space on towers to telecommunication operatorsin Italian municipalities with more than 35,000 inhabitants. This would concern in particular mobile networks operators and fixed wireless access operators; and
• shut out telecommunication operators from the market, by restricting their access to space on Telecom Italia’s and Vodafone’s towers in Italian municipalities with more than 35,000 inhabitants. This would concern in particular mobile network operators already active in Italy or likely to enter the Italian market in the near future, that need to roll out their network.

The proposed remedies

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

• INWIT will make available, on reasonable and non-discriminatory terms and in accordance with a specific timetable, free space on 4,000 towers in Italian municipalities with more than 35,000 inhabitants, where third parties could install, operate, maintain and use their equipment for the provision of current and future fixed wireless and mobile telecommunications services;
• INWIT will give appropriate publicity to the towers made available;
• INWIT will adopt a procedure to timely respond to third parties’ requests for access to the towers, and will only be able to refuse to provide space on such towers for technical reasons, setting out in writing the reasons for such refusal;
• In the event of dispute concerning access to the towers, a fast track dispute resolution mechanism will be put in place where an independent expert will adjudicate on it; and
• INWIT, Telecom Italia and Vodafone will not exercise any early termination right as regards all existing hosting contracts and framework agreements in place and will offer the opportunity to extend those contracts and agreements.

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

Network Sharing

The creation of the joint venture is part of a broader set of cooperation agreements with which Telecom Italia and Vodafone aim at a fast roll-out of 5G in Italy. Telecom Italia and Vodafone intend to extend their existing agreement to share the ‘passive’ parts (masts, towers, etc.) of their networks to the whole of Italy, and to share the ‘active’ parts (the signal processing equipment) of their 2G, 4G and 5G networks outside all municipalities above 100 000 inhabitants as well as most of their densely populated suburbs.

The two operators will maintain separate spectrum holdings and core networks and continue to operate as two commercially independent mobile operators in Italy. These cooperation agreements have not been subject to review in the merger investigation.

The fast and efficient roll-out of 5G, ensuring the European industry’s competitiveness in an increasingly digital society, is a key priority for the Commission. Network sharing is a widespread practice that can facilitate the roll-out of electronic communications networks by reducing costs. It can be a means to a faster and less costly deployment of mobile infrastructure, and the Commission generally is supportive of such types of cooperation. At the same time, network sharing also entails detailed co-ordination and information exchange between competitors, which in certain circumstances may have a negative impact on competition. In order for its efficiencies to actually benefit the telecom clients, an appropriate balance must be found between co-operation and competition in order to ensure compliance with EU antitrust rules. Where this balance lies must be assessed on a case-by-case basis and depends on several factors, related among other things to the extent of sharing, the content of contractual arrangements as well as to the specific market circumstances.

In the framework of the Commission’s preliminary investigation into the network sharing Telecom Italia and Vodafone have decided to scale down their active sharing, leaving out the most densely and highly populated cities and centres of economic importance, corresponding to over 30% of the Italian population and more than 33% of data traffic. The Commission welcomes this development, which increases the areas (and the percentage of Italian population) in which Telecom Italia and Vodafone will continue to compete on network quality while retaining the benefits of network sharing in other cities and towns as well as rural areas.

Considering that with five mobile network operators, the Italian telecommunication markets are less concentrated than in other Member States and that concerns in relation to the network roll-out of recent entrants are being addressed by today’s merger decision, those adjustments seem prima facie appropriate to alleviate possible concerns stemming from the network sharing agreements between Telecom Italia and Vodafone in Italy. The Commission will continue to monitor developments in this area.

Companies and products

Telecom Italia, based in Italy, provides mobile and fixed communication services to customers and business clients, as well as converged offers, internet services, cloud services and content in Italy. Telecom Italia owns and manages the passive infrastructure of its mobile network in Italy through its publicly-listed, majority-owned subsidiary, INWIT.

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 ten Member States, including Italy.

INWIT, based in Italy, is an operator of passive mobile telecommunications infrastructure in Italy. Following the transaction, it would own and manage, in addition to its current telecommunication towers, also those currently owned by Vodafone in Italy.

Merger control rules and procedures

The transaction was notified to the Commission on 17 January 2020.

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 competition in the European Economic Area or any substantial part of it.

The vast majority of 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).

More information will be available on the Competition website, in the Commission’s public case register under the case number M.9674.