Mergers: Commission approves acquisition of Telekom Romania by Orange, subject to conditions

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 Telekom Romania Communications (“TKR”) by Orange SA (“Orange”). The approval is conditional on the divestiture of TKR’s 30% minority shareholding in Telekom Romania Mobile Communications (“TRMC”), which is a direct competitor of Orange.

Executive Vice-President Margrethe Vestager, in charge of competition policy, said: “Europeans need access to fast and reliable communication services, with sufficient alternatives on the market. With this decision, and the commitments offered by Orange, the Romanian telecommunications market will continue to offer high quality communication services at competitive prices.”

Orange, through its Romanian subsidiaries, and TKR provide telecommunications services in Romania, both at the retail and the wholesale level. Orange’s main activities are related to mobile telecommunications, while TKR is mainly active in fixed telecommunications and TV. TKR is indirectly controlled by Deutsche Telekom (“DT”) and owns a 30% minority stake in TRMC, one of the four main mobile operators active in Romania.

The Commission’s investigation

Following its investigation the Commission found that the transaction, as initially notified, would have raised serious competition concerns on the market for retail mobile telecommunications services. In particular, Orange would have acquired TKR’s 30% minority shareholding in TRMC, one of its key competitors on this market. This may have reduced Orange’s incentives to compete with TRMC, would have given Orange access to commercially sensitive information about its competitor, and allowed it to block important investments by TRMC or the operator’s acquisition by a strategic buyer.

In addition, the Commission investigated potential competition concerns in other markets, such as the provision of fixed-mobile convergent (“FMC”) services, the retail market for business connectivity services and the wholesale market for the supply and acquisition of TV channels.

In all these markets, the Commission found that the merged entity would continue to face significant competition from other players and customers would have sufficient alternatives. In particular with regard to FMC services, the transaction would bring benefits, allowing the merged entity to offer this type of services more efficiently.

The proposed remedies

In order to address the competition concerns identified by the Commission in relation to Orange’s proposed acquisition of the 30% minority shareholding in TRMC, Orange offered to:

• secure the divestment of TKR’s 30% minority shareholding in TRMC to Hellenic Telecommunications Organization S.A. (“OTE”), which is the current controlling shareholder of TRMC and a subsidiary of DT;
• not to implement the transaction before TKR and OTE have reached a binding agreement on the divestment, before the Commission has approved both OTE as a suitable purchaser, and the divestment agreement, and finally before the minority stake has been transferred to OTE.

These structural commitments fully remove the competition concerns identified by the Commission in the market for retail mobile telecommunications services. The Commission has therefore concluded that the proposed transaction, as modified by the commitments, no longer raises competition concerns. The decision is conditional upon full compliance with the commitments.

Companies and products

Orange is a global telecommunications operator, active in Romania through its subsidiaries Orange Romania S.A. and Orange Business Romania S.A. It primarily offers mobile telecommunications services relying on its own mobile network, and to a very limited extent, fixed telephony, fixed internet and TV services relying almost exclusively on third-party infrastructure.

TKR is headquartered in Romania and provides fixed telecommunications services, TV services and multiple-play bundles to residential and non-residential customers, wholesale services to other telecommunications operators, and to a very limited degree, mobile telecommunications services as a Mobile Virtual Network Operator relying on an agreement with TRMC.

Merger control rules and procedures

The transaction was notified to the Commission on 8 June 2021.

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). This deadline is extended to 35 working days in cases where remedies are submitted by the parties, such as in this case.

More information will be available on the Commission’s competition website, in the Commission’s public case register under the case number M.10153.