2.5.2019 EN Official Journal of the European Union C 150/5

Summary of Commission Decision of 27 November 2018 declaring a concentration compatible with the internal market and the functioning of the EEA Agreement (Case M.8792 — T-Mobile NL/Tele2 NL) (notified under document number C(2018) 7768) (Only the English version is authentic) (Text with EEA relevance) (2019/C 150/04)

On 27 November 2018 the Commission adopted a Decision in a merger case under Council Regulation (EC) No 139/2004 of y20 Januar 2004 on the control of concentrations between undertakings (1), and in particular Article 8(1) of that Regulation. A non-confidential version of the full Decision, as the case may be in the form of a provisional version, can be found in the authentic language of the case on the website of the Directorate-General for Competition, at the following address: http://ec.europa.eu/comm/competition/index_en.html.

I. THE PROCEDURE (1) On 2 May 2018, the European Commission (the ‘Commission’) received notification of a concentration pursuant to Article 4 of the Merger Regulation (2) by which Deutsche Telekom AG (‘DTAG’ or the ‘Notifying Party’, Germany), through its indirect wholly owned subsidiary T-Mobile Netherlands Holding B.V. (‘TMNL’, Netherlands), acquires within the meaning of Article 3(1)(b) of the Merger Regulation sole control over the entire undertaking Tele2 Netherlands Holding N.V. (‘Tele2 NL’ , Netherlands) (the ‘Transaction’) (3). TMNL and Tele2 NL are collectively referred to as the ‘Parties’.

(2) Based on the phase I investigation, the Commission concluded that the Transaction raised serious doubts as to its compatibility with the internal market and adopted a decision to initiate proceedings pursuant to Article 6(1)(c) of the Merger Regulation on 12 June 2018 (the ‘Article 6(1)(c) Decision’).

(3) On 20 June 2018, the second phase investigation period was extended by 15 working days at the request of the Notifying Party pursuant to the first sentence of the second subparagraph of Article 10(3) of the Merger Regulation.

(4) On 27 June 2018 , the Notifying Party submitted its written comments to the Article 6(1)(c) Decision (the ‘Article 6(1)(c) Response’).

(5) On 10y Jul 2018 , the Commission adopted a d ecision extending the second phase investigation period by five working days in accordance with the third sentence of the second subparagraph of Article 10(3) of the Merger Regulation.

(6) On 27y Jul 2018, the Commission adopted a decision pursuant to Article 11(3) of the Merger Regulation, addressed to Tele2 NL, following Tele2 NL's failure to provide complete information in response to a request for information (‘RFI’) from the Commission (the ‘Tele2 NL Article 11(3) Decision’). On the same day, the Commission adopted a second decision pursuant to Article 11(3) of the Merger Regulation, following TMNL's failure to provide complete information in response to a RFI from the Commission (the ‘TMNL Article 11(3) Decision’). Both the Tele2 NL Article 11(3) Decision and the TMNL Article 11(3) Decision compelled their addressees to submit a complete response to the RFIs originally sent by the Commission and had the effect of suspending the time limits referred to in the first subparagraph of Article 10(3) of the Merger Regulation. Tele2 NL complied with the Tele2 NL Article 11(3) Decision on 3 August 2018 and TMNL complied with the TMNL Article 11(3) Decision on 5 August 2018. Thus, since 5 August was not a working day, pursuant to Article 9(4) of the Commission Regula­ tion (EC) No 802 /2004 (the ‘Implementing Regulation’) (4), the suspension of the time limits expired at the end of the following working day, that is on 6 August 2018.

(1) OJ L 24, 29.1.2004, p. 1. (2) OJ L 24, 29.1.2004, p. 1. 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 termi­ nology of the TFEU will be used throughout this Statement of Objections. (3) OJ C 162, 8.5.2018, p. 27. (4) OJ L 133, 30.4.2004, p. 1. C 150/6 EN Official Journal of the European Union 2.5.2019

(7) Based on the second phase investigation which supplemented the findings of the first phase investigation (jointly referred to as the ‘Market Investigation’), the Commission issued a Statement of Objections on 12 September 2018 (‘Statement of Objections’) (5). In the Statement of Objections, the Commission came to the preliminary view that the Transaction would significantly impede effective competition in a substantial part of the internal market within the meaning of Article 2 of the Merger Regulation.

(8) The Parties submitted their written comments on the Statement of Objections on 28 September 2018 and a supplementary submission based on information made available at the EC premises on 5 October 2018 . At the request of the Notifying Party, an oral hearing was held on 8 October 2018.

II. THE PARTIES AND THE TRANSACTION (9) Both TMNL and Tele2 NL own mobile and (limited) fixed network infrastructure in the Netherlands, on the basis of which they provide fixed and mobile retail telecommunications services to both private and business customers as well as a number of wholesale services. TMNL is an indirect wholly owned subsidiary of DTAG, while Tele2 NL is currently an indirect wholly owned subsidiary of Tele2 AB (Sweden). DTAG is a telecommunications group with global operations, which is headquartered in Germany and listed on the Frankfurt Stock Exchange; its largest share­ holder is the Federal Republic of Germany (31,9 %).

(10) According to a share purchase agreement entered into on 16 February 2018, TMNL has agreed to acquire all the outstanding share capital of Tele2 NL. In consideration of the Transaction TMNL will pay EUR 190 million to Tele2 AB and issue additional shares in the share capital of TMNL to Tele2 AB. The Parties have agreed that TMNL's passive mobile network infrastructure business, which includes assets such as antenna towers and lease contracts for those towers, is outside the scope of the Transaction and will be transferred to Deutsche Telekom Europe B.V. (a wholly owned subsidiary of DTAG) prior to completion of the Transaction (6) . Accordingly, as a result of the Transaction: (i) TMNL will hold 100 % of the issued share capital in Tele2 NL; (ii) Deutsche Telekom Europe B.V. and Tele2 AB will hold 75 % and 25 % of the total issued share capital in TMNL respectively; and (iii) the passive network infrastructure will no longer be part of TMNL. Tele2 AB's 25 % shareholding in TMNL would not confer control and, thus, post-Transaction DTAG would retain sole control over TMNL and acquire sole control over Tele2 NL. Therefore, the Transaction constitutes a concentration within the meaning of Article 3(1)(b) of the Merger Regulation.

(11) The Transaction has an EU dimension within the meaning of Article 1(2) of the Merger Regulation.

III. THE DUTCH MOBILE TELECOMMUNICATIONS SECTOR (12) In addition to the Parties, two other mobile network operators (‘MNOs’) are active in the Netherlands, KPN and VodafoneZiggo. These players both also provide fixed telecommunications services through their fixed networks. The only network sharing agreement in the Netherlands is passive and it is between the Parties. While Tele2 NL owns its own 4G network, it relies on a national roaming agreement with TMNL for 2G and 3G.

(13) There are also approximately 35 Mobile Virtual Network Operators (‘MVNOs’) active in the Netherlands, which offer mobile telecommunications services without having ownership of a network. These MVNOs collectively have a [5-10] % market share by revenue and [10-20] % by subscribers. Most of them have a very small market pres­ ence. The largest MVNOs are Lebara, Lycamobile and Simpel.

(14) The use of mobile data in the Netherlands has substantially increased in the period 2015-2017. Data appears to be the main focus of competition in the provision of retail mobile telecommunication services in the Netherlands. With regard to the different mobile market segments, most customers are private customers (approx. 80 % of mobile lines are private; 20 % are business). Most private customers rely on postpaid mobile services (in 2017, approx. 65 % of private postpaid customers representing 90 % of the revenues).

(15) The demand for multiple play bundles including a mobile component has been growing in the recent years in the Netherlands and is expected to grow further in the future. The Notifying Party estimates that around 35 % of mobile subscriptions are purchased as part of multi play bundles. The Dutch telecoms regulator (the Authority for Consumers & Markets) finds a l ower figure (around 15 % of all SIMs) and also expects a slower growth (around 25 % of all SIMs by 2020). Today, the two main players providing fixed-mobile convergence (‘FMC’ ) bundles are KPN and VodafoneZiggo. Tele2 and TMNL, respectively, have either no or a very limited FMC proposition.

(5) Commission's document C(2018) 6038. (6) Also Tele2 NL's M2M business is carved-out from the Transaction. See Form CO, paragraph 71. 2.5.2019 EN Official Journal of the European Union C 150/7

IV. RELEVANT MARKETS (16) The Transaction concerns the provision of retail mobile telecommunications services and wholesale services for access and call origination on public mobile telephone networks in the Netherlands. The relevant product and geographic markets for these services are defined as follows

1. Retail market for mobile telecommunications services (17) The Commission considers that, in line with its decisional practice, mobile telecommunications services constitute a separate market from fixed telecommunications services. Further, the Commission considers that WiFi cannot be considered as a substitute for mobile telecommunication subscription since; in particular, the quality of WiFi con­ nection is not consistent across the whole of the Netherlands. Likewise the Commission considers that mobile services and over the top services (‘OTT’) are not substitutable as at the very least a m obile data connection is required to access OTT instant messaging and voice services.

(18) As regards the market for the retail provision of mobile telecommunications services to end customers, consistent with its previous decisional practice, the Commission concludes that there is one overall product market for the provision of retail mobile telecommunications services, without it being necessary to define separate product mar­ kets on the basis of the: (1) type of end-customer (business vs private), (2) type of contract ((i) pre-paid vs post- paid and (ii) SIM only subscriptions vs handset subscriptions), (3) t ype of technology (2G, 3G and 4G), and (4) type of service (voice, SMS and data).

(19) Further, in this case, the Commission concludes that a further segmentation between customers of stand-alone mobile services and customer that purchase mobile services as part of a b undle is not appropriate in light, in particular, of the mixed and inconclusive results of its market test on the extent to which switching occurs between multiple play and mobile-only offers.

(20) In line with previous Commission decisions, and in line with the view of the Notifying Party, the Commission concludes that the relevant geographic market for the assessment of this case is national, corresponding to the territory of the Netherlands.

2. Wholesale market for access and call origination on public mobile network (21) In line with previous cases, the Commission concludes that the relevant product market for the assessment of the present case is the market for wholesale access and call origination on public mobile telephone networks. The Commission concludes that the geographic scope of the market is the territory of the Netherlands.

(22) Based on Tele2 NL's very limited activities in the provision of wholesale mobile access services, the Commission has found that the Transaction does not raise competition concerns with respect to this market.

3. Other relevant markets (23) In addition to the two aforementioned markets, the Transaction also concerns other relevant markets, in relation to which the Parties' activities overlap or are vertically linked.

(24) The Commission identified and defined relevant markets for: (1) w holesale international roaming services and (2) w holesale services for mobile call termination. The Commission has found that the Transaction does not raise competition concerns with respect to any of these markets.

(25) The Commission also identified and defined a number of retail and wholesale markets for fixed telecommunication services which constitute relevant product markets. Based on the limited fixed activities of the Parties, the Commis­ sion has found that the Transaction does not raise competition concerns with respect to any of these markets.

V. COMPETITIVE ASSESSMENT (26) The only horizontally affected market is the market for retail mobile telecommunication in the Netherlands. The private customer segment would also be affected individually. However, the business customer segment would not and, for this reason, it is not assessed separately in the Decision. There is no vertically affected market.

1. Non-coordinated horizontal effects on the market for retail mobile telecommunication services in the Netherlands (27) TMNL and Tele2 NL are respectively the third and fourth largest MNOs in the retail market for the provision of mobile telecommunications services in the Netherlands. Tele2 NL has a l imited market share of approximately [5-10] % both in terms of revenues and subscribers. Post-Transaction, the merged entity would have a share of [20-30] % by subscribers and [20-30] % by revenues, making it the third largest player in the Dutch retail mobile market after KPN and VodafoneZiggo in terms of revenues but the second largest player by a small margin before VodafoneZiggo in terms of subscribers. C 150/8 EN Official Journal of the European Union 2.5.2019

(28) The Commission considers that TMNL has acted as an important competitor on the retail mobile telecommunica­ tions market in the Netherlands. Indeed, TMNL has recently moved towards a more aggressive strategy and, in particular, it was the first player to introduce unlimited data tariffs in the Netherlands. TMNL has also rolled out the best network in the Netherlands that offers the highest network quality. The Commission has no reason to believe that TMNL's current competitive constraint is likely to deteriorate absent the Transaction.

(29) With respect to Tele2 NL, the Commission concludes that, in the framework of the forward looking analysis which has to be carried out under the Merger Regulation, Tele2 NL cannot be considered an important competitive force within the meaning of paragraphs 37-38 of the Horizontal Merger Guidelines on the retail mobile telecommunica­ tions market in the Netherlands. Indeed, even though Tele2 NL's entry as an MNO was initially accompanied by aggressive commercial offers and constituted an important reason for the decline in price, which has been observed in the Netherlands, Tele2 NL has only been able to achieve limited market share growth ([0-5] % in sub­ scribers and [0-5] % in revenues since its entry as an MNO in November 2015) and, more recently, Tele2 NL has been competing less aggressively for new customers. In addition, Tele2 NL's network is inferior to that of its MNO competitors (Tele2 NL has less spectrum and less sites) which results in particular in lower network quality.

(30) Based on its Market Investigation, the Commission also finds that, even though it is likely that Tele2 NL would continue operating as MNO in the Dutch market in the absence of the Transaction, its competitive strength will likely deteriorate. More specifically, the Commission finds that, the network quality gap between Tele2 NL and the other three MNOs will likely further increase. Additionally, the Commission notes that the other Dutch MNOs are likely to improve their network quality in the coming years. Even if Tele2 NL's network quality was to deteriorate only in a limited extent, the gap in performance with the other MNOs would therefore still further increase.

(31) With respect to the competitive constraint exercised by the other market players, the Commission concludes that both KPN and VodafoneZiggo exert a strong competitive force. As regards the MVNOs' ability to compete, consis­ tent with previous cases, the Commission considers that this ability is very limited in several aspects. First, this ability crucially depends on the access conditions that MVNOs obtain at the wholesale level, conditions that are controlled by the MNOs themselves. Second, MVNOs have limited bargaining power to negotiate better wholesale access conditions. Third, most MVNOs are small niche players, with a s mall presence on the market and little ability to differentiate themselves from MNOs.

(32) The evidence in the Commission's file indicates that pre-Transaction TMNL and Tele2 NL are close competitors. However, it is expected that the gap in network performances between Tele2 NL and TMNL will further increase in the coming years therefore casting doubts on Tele2 NL's ability to sustain the close competition that it currently exercises on TMNL through its unlimited offer. Taking into account this element as well as Tele2 NL's small market share and hence small increment brought about by the Transaction, the current closeness between TMNL and Tele2 NL is therefore insufficient to find significant anticompetitive effects to arise from the Transaction, in particular in the form of price effects.

(33) In the context of its assessment of non-coordinated horizontal effects, the Commission has specifically assessed a number of related theories of harm that were put to it by third party complainants. The Commission considers that all these complaints can be dismissed for the following reasons:

a) MVNO complaints. Based on concerns raised by Dutch MVNO Simpel, the Commission found that TMNL's incentives in relation to the provision of wholesale access services vis-à-vis its own wholesale customers are likely to change post-Transaction which could lead to a further reduction of the already limited competitive constraint exerted by MVNOs. The Commission concluded that the Transaction is likely to have a negative impact on the wholesale conditions of Simpel which would in turn additionally deteriorate the competitive pressure that Simpel is likely to exert at the retail level. However, the Commission has also come to the conclu­ sion that the effect on competition in the retail market for mobile telecommunication services will not be sig­ nificant since (i) already pre-Transaction the competitive constraint exerted by MVNOs is very limited, and (ii) the size of the price effect is very limited.

b) Spectrum asymmetry. The Commission dismisses this complaint raised by the two competing MNOs, KPN and VodafoneZiggo on the ground that the spectrum aggregation that the merged entity would obtain from the Transaction would not significantly impede KPN's and VodafoneZiggo's ability to compete. 2.5.2019 EN Official Journal of the European Union C 150/9

c) Distributor complaints. The Commission dismisses this complaint on the ground that, even if the reduction of the number of players in the retail market may have a negative impact on independent distributors, these players do not exert a competitive constraint on MNOs. Therefore any possible negative impact on independent distribu­ tors would unlikely have an impact on the price for end customers. In addition, the Commission has no evi­ dence on file to suggest that the Transaction would significantly reduce the merged entity's incentive to use indirect sales channels.

(34) Overall, the Commission considers that the elimination of the competitive constraints exerted by the Parties pre- Transaction, both on each other and on other competitors is not likely to significantly weaken competition and induce significant price increases as well as reduce incentives to innovate and invest in network quality and a reduction in innovative pricing strategies. This conclusion is in particular based on the limited growth that Tele2 NL has been able to achieve despite competing aggressively and the Commission's finding that the competitive constraints exercised by Tele2 NL relative to the competing MNOs is likely to decrease going forward.

(35) The Commission has also undertaken an in-depth quantitative assessment of the likely price effects of the elimina­ tion of competition in the retail market. Overall, the quantitative analysis performed by the Commission produced mixed results, which do not clearly indicate that the Transaction is likely to result in significant price increases.

(36) The Commission considers that its quantitative analysis supports the conclusions reached by the qualitative market investigation. In the Commission's view, the Transaction would not significantly impede effective competition as a result of horizontal non-coordinated effects in the market for retail mobile telecommunication services in the Netherlands.

2. Coordinated horizontal effects on the market for retail mobile telecommunication services in the Netherlands. (37) The Commission concludes that several features of the Dutch retail market for mobile telecommunications services may be conducive to coordination.

(38) However, the Commission concludes that the Transaction would not significantly impede effective competition as a result of horizontal coordinated effects, in particular given the asymmetry between the merged entity on the one hand, and KPN and VodafoneZiggo on the other, which would not be materially eliminated by the Transaction and the significant uncertainties as to the ability of Tele2 NL to remain as aggressive a competitor in the coming years.

3. Efficiencies (39) The Commission considers that the efficiency claim put forward by the Notifying Party whereby as a consequence of the Transaction the roaming fee that Tele2 NL currently pays to TMNL for providing access to the 2G and 3G network to its customer base will be internalised by the merged entity satisfies the three cumulative criteria required under the Merger Guidelines of benefit to consumers, merger specificity and verifiability.

(40) With respect to the further efficiency claims, the Commission leaves open the question whether they satisfy these three criteria given that the Transaction does not give rise to a significant impediment to competition on the rele­ vant markets even without accepting any of these further efficiency claims.

VI. CONCLUSION (41) The Decision concludes that the Transaction would not significantly impede effective competition in the internal market or in a substantial part of it.

(42) Consequently, the Decision declares the Transaction compatible with the internal market, in accordance with Articles 2(2) and Article 8(1) of the Merger Regulation.