Case No COMP/M.5532 - CARPHONE WAREHOUSE / TISCALI UK
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EN Case No COMP/M.5532 - CARPHONE WAREHOUSE / TISCALI UK Only the English text is available and authentic. REGULATION (EC) No 139/2004 MERGER PROCEDURE Article 6(1)(b) NON-OPPOSITION Date: 29/06/2009 In electronic form on the EUR-Lex website under document number 32009M5532 Office for Official Publications of the European Communities L-2985 Luxembourg COMMISSION OF THE EUROPEAN COMMUNITIES Brussels, 29/06/2009 SG-Greffe(2009) D/3871 In the published version of this decision, some C(2009) 5323 information has been omitted pursuant to Article 17(2) of Council Regulation (EC) No 139/2004 concerning non-disclosure of business secrets and PUBLIC VERSION other confidential information. The omissions are shown thus […]. Where possible the information MERGER PROCEDURE omitted has been replaced by ranges of figures or a ARTICLE 6(1)(b) DECISION general description. To the notifying party: Dear Sir/Madam, Subject: Case No COMP/M.5532 – Carphone Warehouse/ Tiscali UK Notification of 20 May 2009 pursuant to Article 4 of Council Regulation No 139/20041 1. On 20 May 2009, the Commission received a notification of a proposed concentration pursuant to Article 4 of Council Regulation (EC) No 139/2004 ("the Merger Regulation") by which the undertaking The Carphone Warehouse Group PLC ("CPW", UK) acquires within the meaning of Article 3(1)(b) of the Council Regulation control over of the whole of the undertaking Tiscali UK Limited ("Tiscali UK", UK) by way of purchase of shares. I. THE PARTIES 2. CPW is listed on the London Stock Exchange and is active in the UK and eight other Member States in the sale of mobile handsets, mobile connections as well as a range of connected devices, such as laptops. In the UK, it is active as broadband and narrowband Internet access provider, fixed-line telecommunication services operator and as a Mobile Virtual Network Operator ("MVNO") for residential and business customers. 3. Tiscali UK, a subsidiary of Tiscali SpA, an Italian company listed on the Milan stock exchange, is a telecommunications and Internet Service Provider ("ISP") supplying broadband and narrowband Internet access services, fixed-line telecommunication services and digital TV services to business and residential customers in the UK. 1 OJ L 24, 29.1.2004, p. 1. Commission européenne, B-1049 Bruxelles / Europese Commissie, B-1049 Brussel - Belgium. Telephone: (32-2) 299 11 11. II. THE OPERATION 4. According to a Sale and Purchase Agreement signed on 8 May 2009, CPW, via its subsidiary TalkTalk Group Limited, proposes to acquire the whole of the issued share capital of Tiscali UK Limited and all its UK subsidiaries. III. COMMUNITY DIMENSION 5. The undertakings concerned have a combined aggregate world-wide turnover of more than EUR 5 000 million2 (CPW: EUR 4 474 million in 2008, Tiscali UK: EUR 683 million in 2008). Each of them has a Community-wide turnover in excess of EUR 250 million (CPW: EUR 4 413 million in 2008, Tiscali UK: EUR 683 million in 2008). While Tiscali UK achieves its entire Community-wide turnover in the UK, CPW achieves 65% i.e. less than two thirds of its Community-wide turnover in that Member State. The proposed concentration has therefore a Community dimension. IV. THE RELEVANT MARKETS 6. CPW and Tiscali UK are both active in the UK in (i) the provision of Internet access services to end customers; (ii) the wholesale provision of broadband Internet access to competing ISPs in local exchanges; and (iii) the provision of fixed-line telephony services to end customers. In addition, CPW through its network subsidiary Opal Telecom has limited activities in the wholesale provision of fixed-line telephony services (end-to-end calls) to resellers who in turn provide fixed-line telephony services to end users. A. The Relevant Product Markets The provision of Internet access services to end customers 7. Internet access services enable customers to access the Internet. Additional services include website hosting and the provision of e-mail facilities. 8. In previous decisions3, the Commission has distinguished between three common forms of Internet access: (a) narrowband (dial-up service); (b) broadband (higher bandwidth services); and (c) dedicated access (leased lines). Both parties are active in narrowband, broadband and, to a limited extent, in dedicated access. Broadband Internet access can be 2 Turnover calculated in accordance with Article 5(1) of the Merger Regulation and the Commission Consolidated Jurisdictional Notice of 10 July 2007. 3 See Case COMP/M.3914 - Tele2/Versatel, Commission decision of 7 September 2005. See also the Commission Recommendation 2007/879/EC of 17 December 2007 on relevant product and service markets within the electronic communications sector susceptible to ex ante regulation in accordance with Directive 2002/21/EC of the European Parliament and of the Council on a common regulatory framework for electronic communication networks and services, OJ L 344, 28.12.2007, p. 65 (the "Commission Recommendation"). 2 provided through different technologies, at present mainly through: (i) XDSL4; (ii) cable5; or (iii) mobile6. Last, a distinction can be made between different types of customers. Narrowband / broadband/ dedicated access 9. Broadband connections enable customers to use the Internet and PSTN7-based telephony simultaneously and take advantage of services such as Voice over Internet Protocol ("VoIP"), which is an ancillary service to the provision of Internet access. VoIP services enable voice calls and messaging services to be provided over a broadband connection rather than over traditional telephone networks. 10. Both the Commission8 and the UK regulatory authority, the Office of Communications (Ofcom), have indicated in previous decisions that broadband and narrowband Internet access constitute two separate markets. In its wholesale broadband sector review in 2004, Ofcom defined broadband Internet access as having three distinguishing features which are not available with narrowband access: • the service is always on (i.e. no dial-up is required); • it is possible to use both voice and data services simultaneously where they are provided together (for example, over the same access route) or separately, perhaps using more than one access route; and • broadband has a faster downstream speed than a dial-up connection. 11. The notifying party suggests treating narrowband and broadband Internet access as being part of the same market although the Commission in its past decisional practice has considered them as being separate. The notifying party submits that in the UK, as in other countries, there is a progressive migration of customers from narrowband to broadband, since broadband offers superior service and the price differential with narrowband is decreasing9. Particularly in the UK, broadband access is also increasingly being bundled with other communications services (mobile and fixed telephony) and/or television services (Internet Protocol Television10 – "IPTV") by several operators (so-called "multiple-play" or "triple-play"). 4 XDSL enables fast data transmission over normal copper telephone lines. XDSL comprises ADSL (Asymmetric Digital Subscriber Line)/ADSL2/VDLS/SDSL, depending on the bandwidth and the symmetry between the upstream and downstream bandwidth. 5 Cable is a co-axial cable, which enable large bandwidth connections. 6 Such as 3G (e.g., UMTS or WiMax), 4G (e.g., LTE) and including here satellite based access. 7 Public Switched Telephone Network. 8 See for example, Cases COMP/M.4417 - Telecom Italia/AOL, Commission decision of 20 October 2006 and COMP/38.233 - Wanadoo Interactive, Commission decision of 16 July 2003. 9 This evolution is mainly due to the widespread use and evolution of ADSL / ADSL2. 10 IPTV is the delivery of the television signal over the Internet, whereby the video stream is encoded as a series of IP packets. 3 12. The notifying party explains that there has been a steady decline in the numbers of narrowband customers in recent years. Out of a total of 18.3 million Internet access users in 2007 in the UK, only 2.7 million were narrowband customers. 13. The market investigation indicated that the migration of customers is one-way only, namely towards broadband, and it is not considered unlikely that narrowband will disappear completely over time. Respondents to the market investigation were largely of the view that a separate assessment of the narrowband Internet access was not necessary. 14. For the purposes of the present decision, it can be left open whether broadband and narrowband constitute distinct product markets as the proposed concentration does not give rise to any competition concerns under any of the alternative product market definitions. 15. Dedicated access (leased lines) is a costly product used only by large corporate clients, which require much higher performance levels in terms of security and bandwidth. On the basis that the transaction leads only to a minor horizontal overlap11 in this area, the analysis of this activity is not pursued any further. Broadband technology: XDSL / cable / mobile broadband (3G) 16. The notifying party submits that the market for the provision of broadband Internet access comprises access via XDSL (ADSL, ADSL2 and VDSL) and cable. 17. In its decisions in the Carphone Warehouse/AOL UK12, LGI/Telenet13 and Wanadoo14 cases, the Commission found that the product market included both offerings based on ADSL technology and offerings based on cable modem technology. 18. The market investigation was overwhelmingly