EUROPEAN COMMISSION DG Competition Case M.8284 - DEUTSCHE TELEKOM / ORANGE / BUYIN Only the English text is available and authentic. REGULATION (EC) No 139/2004 MERGER PROCEDURE Article 6(1)(b) NON-OPPOSITION Date: 10/03/2017 In electronic form on the EUR-Lex website under document number 32017M8284 EUROPEAN COMMISSION Brussels, 10.3.2017 C(2017) 1727 final In the published version of this decision, some information has been omitted pursuant to Article PUBLIC VERSION 17(2) of Council Regulation (EC) No 139/2004 concerning non-disclosure of business secrets and other confidential information. The omissions are shown thus […]. Where possible the information omitted has been replaced by ranges of figures or a general description. To the notifying parties: Subject: Case M.8284 – Deutsche Telekom / Orange / BuyIn Commission decision pursuant to Article 6(1)(b) of Council Regulation No 139/20041 and Article 57 of the Agreement on the European Economic Area2 Dear Sir or Madam, (1) On 6 February 2017, the European Commission received notification of a proposed concentration pursuant to Article 4 of the Merger Regulation by which the undertakings Deutsche Telekom AG ('DT') (Germany) and Orange S.A. ('Orange') (France) convert their existing non-full-function joint venture, BuyIn SA/NV ('BuyIn') (Belgium) into a joint venture performing on a lasting basis all the functions of an autonomous economic entity, within the meaning of Article 3(4) of the Merger Regulation (the 'Transaction').3 DT and Orange are designated hereinafter as the 'Parties'. 1 OJ L 24, 29.1.2004, p. 1 (the 'Merger Regulation'). With effect from 1 December 2009, the Treaty on the Functioning of the European Union ('TFEU') has introduced certain changes, such as the replacement of 'Community' by 'Union' and 'common market' by 'internal market'. The terminology of the TFEU will be used throughout this decision. 2 OJ L 1, 3.1.1994, p. 3 (the 'EEA Agreement'). 3 Publication in the Official Journal of the European Union No C 47, 14.02.2017, p. 7. Commission européenne, DG COMP MERGER REGISTRY, 1049 Bruxelles, BELGIQUE Europese Commissie, DG COMP MERGER REGISTRY, 1049 Brussel, BELGIË Tel: +32 229-91111. Fax: +32 229-64301. E-mail: [email protected] 1. THE PARTIES (2) DT is an integrated telecommunications and information technology service provider with activities worldwide in more than 50 countries. DT offers fixed and mobile telecommunication services, Internet and IPTV products as well as IT products to consumers mainly in Europe and the US. In addition, DT provides telecommunications services to other carriers and Internet service providers ('ISPs') on wholesale level as well as information and communication technology ('ICT') solutions for medium and large-sized customers around the world. (3) In the European Union, DT operates companies offering fixed and mobile telecommunications services in Austria, Bulgaria, Croatia, Czech Republic, Germany, Greece, Hungary, the Netherlands, Poland, Romania and Slovakia. (4) Orange is a global telecommunications operator active in around 30 countries worldwide. Orange also provides telecommunications services to multinational companies under the brand Orange Business Services. (5) Orange provides a whole range of mobile telecommunications services in several European countries, including Belgium, France, Luxembourg, Poland, Romania, Slovakia and Spain. Orange also provides various fixed telecommunications services in Belgium, France, Poland, Romania, Spain and Slovakia. (6) BuyIn is an existing non-full function 50/50 joint venture between DT and Orange, set up in 2011.4 BuyIn is entrusted, on behalf of DT and Orange, with the task of negotiating with suppliers, framework agreements for a range of products and services used by DT and Orange in their respective telecommunications businesses. BuyIn merely handles negotiations but does not itself purchase products and services for the Parties' groups nor does BuyIn offer own activities on the downstream telecommunications markets. 2. THE CONCENTRATION (7) By resolution adopted on 16 December 2016,5 the Parties decided to extend the scope of BuyIn's activities to enable it to provide procurement-related services to third parties as well.6 As a result, BuyIn will fulfil all the conditions of a full- function joint venture for the reasons set out below.7 (8) First, BuyIn will have sufficient resources to operate independently on the market, as it will have its own management dedicated to its day-to-day operations and access to sufficient financial means, employees (300), and other assets. 4 The creation of BuyIn as a non-full function joint venture was reviewed by the German Federal Cartel Office ('FCO') and the Polish Office of Competition, which unconditionally approved it respectively on 8 February 2012 and on 31 August 2011. […]. 5 [Internal process regarding the decision making]. 6 The strategic rationale of the Transaction is, according to the Parties, to enlarge the scale of BuyIn's procurement activities […]. 7 See Commission Consolidated Jurisdictional Notice under Council Regulation (EC) No 139/2004 on the control of concentrations between undertakings (2008/C 95/01). 2 (9) Second, BuyIn will exercise functions that go beyond one specific function for its parents, as it will (i) organise and coordinate the entire procurement process up to the final negotiations and conclusions of framework agreements with the suppliers on behalf of third-parties; and (ii) provide various studies and counselling to third-parties on telecommunications sourcing-related topics. (10) Third, regarding the relationship with its parents, BuyIn's business plan foresees that the revenues generated from activities with third-parties will increase over the next [coming] years to reach [>20%] of BuyIn's total revenues by […]. The fees that BuyIn charges to its parents and to third parties are calculated according to the same methodology, [margin calculation]. [The price structure]8 does not put into question the fact that BuyIn will deal with the Parties at arm's length on the basis of normal commercial conditions. Moreover, BuyIn's business plan indicates that BuyIn appears truly committed to increasingly attract business from third-parties.9 (11) Finally, BuyIn will be created on a lasting basis, since, with the new plans to open up BuyIn to third-parties, the Parties intend to run BuyIn beyond […], the currently foreseen end date of the cooperation. (12) As a result, the Transaction constitutes the creation of a full-function joint venture and, as such, a concentration within the meaning of Article 3(4) of the Merger Regulation. 3. EU DIMENSION (13) The undertakings concerned have a combined aggregate world-wide turnover of more than EUR 5 000 million10 (DT: EUR 69 228 million; Orange: EUR 40 232 million). Each of them has an EU-wide turnover in excess of EUR 250 million (DT: EUR […] million; Orange: EUR […] million), but they do not achieve more than two-thirds of their aggregate EU-wide turnover within one and the same Member State. The notified operation therefore has an EU dimension. 4. RELEVANT MARKETS (14) There is no horizontal overlap between the activities of BuyIn and the activities of the Parties. (15) BuyIn is active in the supply of procurement-related services for certain products, namely network technology, digital home & platform ('DHP'), customer equipment, IT products and services (together, hereinafter 'Equipment'), which are used by DT and Orange in their respective telecommunications businesses. 8 [Information about margins]. 9 [Business plan]. 10 Turnover calculated in accordance with Article 5 of the Merger Regulation. 3 (16) DT and Orange are both active in the upstream markets for the purchase of the different types of Equipment, which they source with the assistance of BuyIn ('upstream purchasing markets'). (17) Moreover, DT and Orange have activities in a number of downstream markets (for the purpose of which they source Equipment through BuyIn), including but not limited to the provision of mobile and fixed telecommunications services, both at retail and wholesale level ('downstream supply markets'). 4.1. Supply of procurement-related services 4.1.1. Relevant product market 4.1.1.1. Parties' view (18) The Parties submit that BuyIn is active in the supply of procurement-related services for certain products which are used by DT and Orange in their respective telecommunications businesses. BuyIn does not purchase the Equipment, but solely negotiates framework agreements with suppliers of Equipment, which fix the terms and conditions under which the Parties themselves can place orders directly with the suppliers. The actual supplier agreements are entered into directly by each of Orange and DT (or their respective subsidiaries in the various Member States) following a second round of bilateral negotiations with the relevant supplier.11 (19) The Parties do not take any specific view on the possible product market definition regarding the supply of procurement-related services offered by BuyIn. 4.1.1.2. Commission's assessment (20) There are no Commission precedents examining the potential markets for the provision of procurement-related services for products used in the downstream telecommunications markets. (21) During the market investigation conducted in the present case, the vast majority of telecom and IT services providers indicated that, in the EEA, they procure network equipment by using their own in-house procurement services (as opposed to an external provider or a procurement alliance similar to BuyIn).12 (22) As outlined by the Parties, the Commission also notes that, similarly to the Parties, other telecommunication providers have developed joint purchasing strategies. This is for instance the case of Telefónica in the framework of the Telefónica Partner Program13 or of the Vodafone Procurement Company.14 11 DT and Orange (or their respective subsidiaries) remain free to choose the particular products actually purchased, and to negotiate additional beneficial conditions with the supplier. 12 See replies to Commission questionnaire to telecom and IT services providers Q1 of 7 February 2017, question 2.