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Telefónica breached commitments in E-Plus acquisition, says EC

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Staff Writer | February 22, 2019
The European Commission has sent a Statement of Objections to Telefónica Deutschland alleging the company breached commitments it offered to secure the Commission's approval under the EU Merger Regulation of its acquisition of E-Plus in 2014.
Europe   The Commission cleared the acquisition
The European Commission approved under the EU Merger Regulation and subject to conditions, the proposed acquisition of E-Plus, the German mobile telecommunications business of Dutch Telecom operator KPN, by Telefónica Deutschland, a subsidiary of Telefónica, head-quartered in Spain.

The Commission cleared the acquisition subject to full compliance with commitments submitted by Telefónica. These commitments would ensure that new competitors would be able to enter the mobile telecommunications market in Germany and that the position of existing competitors would be strengthened.

The commitments consisted of three main elements, with Telefónica committing:

1) to sell, before the acquisition was completed, up to 30% of the merged company's network capacity to one or several (up to three) Mobile Virtual Network Operators (MVNOs) in Germany at fixed prices. Such virtual operators offer mobile telecoms services to consumers by using the network of other operators;

2) to offer to divest radio wave spectrum and certain assets either to a new network operator or subsequently to virtual operators who used network capacity made available thanks to the commitments;

3) to extend existing wholesale agreements with Telefónica's and E-Plus' wholesale partners and to offer wholesale 4G services to all interested players at "best prices". In addition, Telefónica committed to improve its wholesale partners' ability to switch their customers from one MNO to another.

The Statement of Objections issued by the Commission today relates to the third element of the commitments, and more specifically to Telefónica's obligation to offer wholesale 4G services to all interested players at “best prices under benchmark conditions”.

The Commission's preliminary view is that Telefónica did not properly implement its obligations under the wholesale 4G access obligation by not including certain existing wholesale agreements in the benchmark.

Had Telefónica included such additional agreements, third parties would have benefited from more advantageous 4G wholesale access conditions. As a result of Telefónica's conduct, the ability of third parties to compete in the German market for mobile communication services was reduced.

The sending of a Statement of Objections does not prejudge the final outcome of the investigation.Telefónica now has until 5 April to respond to the Statement of Objections.

If the Commission were to conclude that Telefónica did not respect a commitment that was part of the clearance decision approving its acquisition of E-Plus, it could impose a fine of up to 10% of Telefónica Deutschland's annual worldwide turnover and/or revoke the decision.