EUROPEAN COMMISSION

DG Competition

Case M.8883 - PPF GROUP / TELENOR TARGET

Only the English text is available and authentic.

REGULATION (EC) No 139/2004

MERGER PROCEDURE

Article 6(1)(b) NON-OPPOSITION

Date: 27/07/2018

In electronic form on the EUR-Lex website under document

number 32018M8883

EUROPEAN COMMISSION

Brussels, 27.7.2018 C(2018) 5150 final

In the published version of this decision, some

information has been omitted pursuant to Article

17(2) of Council Regulation (EC) No 139/2004

concerning non-disclosure of business secrets and

other confidential information. The omissions are

PUBLIC VERSION

shown thus […]. Where possible the information

omitted has been replaced by ranges of figures or a

general description.

To the notifying party

1Regulation No 139/2004and Article 57 of the Agreement on the

2European Economic Area

Dear Sir or Madam,

(1) On 22 June 2018, the European Commission received notification of a proposed

concentration pursuant to Article 4 of the Merger Regulation by which PPF Group

N.V. ("PPF") intends to acquire sole control of Telenor Bulgaria EAD ("Telenor

Bulgaria"), Telenor Magyarország Zrt. ("Telenor Hungary"), Telenor Real Estate

Hungary Zrt., Telenor Common Operation Zrt., Telenor d.o.o. Podgorica ("Telenor

Montenegro") and Telenor d.o.o. Beograd ("Telenor Serbia") (together the "Telenor

Target Companies"), by way of purchase of shares (the "Transaction").

PPF is designated hereinafter as the "Notifying Party" and, together with the

Telenor Target Companies, as the "Parties".

1. THE PARTIES

(2) PPF is a large multinational finance and investment group focusing on financial

services, consumer finance, telecommunications, biotechnology, retail services, real

estate, agriculture and transportation. PPF started its operations in the Czech

1OJ 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.

OJ L 1, 3.1.1994, p. 3 (the 'EEA Agreement').

Publication in the Official Journal of the European Union No C 230, 2.7.2018, p. 9.

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: COMP-MERGER-REGISTRY@ec.europa.eu.

Republic and is now mainly active in the Czech Republic, Slovakia and, in sectors

other than telecommunications, also in Russia, Germany, the Netherlands, the

United Kingdom, the U.S., China, India, Vietnam, Indonesia and the Philippines.

PPF is controlled by Mr. Petr Kellner.

(3) The Telenor Target Companies are active primarily in telecommunications, acting

as mobile operators in Bulgaria, Hungary, Serbia and Montenegro. The core of

their activities therefore lies in providing mobile telecommunication services to

end customers. The scope of activities of the Telenor Target Companies is mainly

confined to the countries of their incorporation, for which they hold the relevant

telecommunication licenses.

2. THE OPERATION

(4) On 21 March 2018, a Share Sale and Purchase Agreement was concluded among

inter alia (i) Telenor Eiendom Holding AS, (ii) Telenor Mobile Communications

AS, (iii) Telenor A/S, and (iv) Telenor Communication II AS, as sellers, and PPF

TMT Bidco 1 B.V., as purchaser, pursuant to which PPF will, indirectly, through

PPF TMT Bidco 1 B.V., acquire: (i) 100% of the shares in Telenor Bulgaria, (ii)

100% of the shares in Telenor Hungary, (iii) 100% of the shares in Telenor Real

Estate Hungary Zrt. , (iv) 100% of the shares in Telenor Common Operation Zrt.,

(v) 100% of the share capital in Telenor Montenegro and (v) 100% of the share

capital in Telenor Serbia.

(5) The Transaction constitutes a concentration within the meaning of Article 3(1)(b)

of the Merger Regulation.

3. EU DIMENSION

(6) The undertakings concerned have a combined aggregate world-wide turnover of

more than EUR 5 000 million(PPF: EUR […] million; the Telenor Target

Companies: EUR […] million; combined: EUR […] million; in 2017). Each of

them has an EU-wide turnover in excess of EUR 250 million (PPF: EUR […]

million; the Telenor Target Companies: EUR […] million; in 2017), but they do

not achieve more than two-thirds of their aggregate EU-wide turnover within one

and the same Member State.

(7) The notified operation therefore has an EU dimension pursuant to Article 1(2) of

the Merger Regulation.

4. RELEVANT MARKETS

(8) The Transaction does not result in any horizontal overlap in the EEA in the

telecommunications sector because the activities of the Parties are confined to the

territories for which they hold the respective telecommunication licenses, i.e.

Bulgaria and Hungary in the case of the Telenor Target Companies, and the Czech

Republic and Slovakia in the case of PPF (through its subsidiaries O2 CR and O2

SK).

(9) PPF and the Telenor Target Companies are present upstream in (i) wholesale

international roaming services; (ii) wholesale mobile call termination services and

(iii) wholesale fixed call termination services in the EEA countries in which the

Parties are present (i.e. PPF in the Czech Republic and Slovakia, the Telenor

Target Companies in Bulgaria and Hungary). Those services are vertically linked

to (i) the retail supply of mobile telecommunications services and (iii) the retail

supply of fixed telephony services to end customers.

4.1. Retail mobile telecommunications services

(10) Mobile telecommunications services to end customers include services for national

and international voice calls, SMS (including MMS and other messages), mobile

internet data services and retail international roaming services.

4.1.1. Product market definition

(11) The Notifying Party submits that in the present case, the relevant product market

should be defined, in line with the Commission’s previous decisional practice, as

the overall retail market for mobile telecommunications services without further

segmentation.

(12) The Commission considers that, in line with its previous practice,the product

market for retail mobile telecommunications services includes mobile services

such as voice, SMS/MMS, data and international roaming services, considering

that all providers offer all these types of services to their customers.

(13) The Commission has also considered whether the product market can be further

segmented between residential and business customers and whether "over-the-top"

("OTT") services should be considered as part of the market. In any case, for the

purpose of the present decision, the exact product market definition in relation to

the provision of retail mobile telecommunications services can be left open as the

Transaction does not give rise to serious doubts as to its compatibility with the

internal market under any possible market definition.

4.1.2. Geographic market definition

(14) The Notifying Party considers that the market should be considered national in

scope in line with previous Commission decisions.

(15) The Commission has consistently found that the markets for retail mobile services

provided to end consumers are national in scope.

(16) The Commission considers the market for retail mobile services to be national in

scope, taking into account the fact that licences to mobile operators are granted on

a national basis.

4.2. Retail fixed telephony services

(17) On the market for retail supply of fixed telephony services, operators provide fixed

voice services to end customers. In line with previous Commission decisions, fixed

voice services include the provision of connection services or access at a fixed

location or address to the public telephone network for the purpose of making and

receiving calls and related services.

4.2.1. Product market definition

(18) The Notifying Party submits that in the present case, the relevant product market

should be defined, in line with previous Commission decisions, as the overall retail

market for fixed line telephony services, including VoIP services.

(19) In previous decisions, the Commission considered that a distinction between local /

national and international calls as well as between residential and business

customers may not be relevant.The Commission did not take a definitive view

with regard to these possible further segmentations of the retail fixed telephony

services market. The Commission concluded however that traditional fixed voice

services and managed VoIP services are interchangeable within a single market for

the retail supply of fixed telephony services.

(20) For the purpose of the present decision, the exact product market definition can be

left open as the Transaction does not give rise to serious doubts as to its

compatibility with the internal market under any possible market definition.

4.2.2. Geographic market definition

(21) The Notifying Party considers the market to be national in scope, based on the

Commission's precedents.

(22) The Commission considers the market for the supply of fixed telephony services to

be national in scope, as this reflects the continuing importance of the role of

national regulation in the telecommunications sector, the supply of upstream

wholesale services on a national basis, as well as the fact that the pricing policies

of telecommunications providers are predominantly national.

4.3. Wholesale mobile call termination services

(23) When someone calls a mobile phone connected to a different network that call is

terminated on the network of the receiving mobile phone. In order for a retail

mobile service provider to be able to provide calls to a different network, it must

purchase wholesale terminations services on these other networks. This is done

through interconnection agreements between the various network operators.

4.3.1. Product market definition

(24) The Notifying Party submits that each individual mobile network constitutes a separate market for call termination because the operator transmitting the call can reach the intended recipient only through the operator of the network to which the recipient is connected. There is thus no substitute for call termination on each individual network.

(25) The Commission considers that there is no substitute for call termination on each individual network since the operator transmitting the outgoing call can reach the intended recipient only through the operator of the network to which the recipient is connected.

(26) The Commission concludes, in line with previous decisions, that termination on each individual mobile network constitutes a separate product market.

4.3.2. Geographic market definition

(27) In line with previous Commission decisions, the Notifying Party submits that the market for mobile call termination services should be considered national in scope.

(28) The Commission concludes, in line with previous decisions, that the market for mobile call termination services is national in scope, as each wholesale market for call termination corresponds to the dimensions of the operator’s network and therefore is limited to the national territory of the operator's network.

4.4. Wholesale fixed call termination services

(29) Call termination is the service provided by a network operator on the supply side to other network operators on the demand side, whereby a call originating in a demand side operator's network is delivered to a user in the supply side operator's network. This service is required by every originating operator, as it is necessary for its customers to be able to communicate with the customers of other networks. Call termination is therefore a wholesale service that is resold or used as an input for the provision of downstream retail telephony services.

4.4.1. Product market definition

(30) In line with previous Commission decisions, the Notifying Party submits that the relevant product market is the wholesale market for call termination on each individual fixed network.

(31) The Commission considers that there is no substitute for call termination on each individual network since the operator transmitting the outgoing call can reach the intended recipient only through the operator of the network to which the recipient is connected.

(32) The Commission considers that, as regards wholesale call termination services, termination on each individual fixed network constitutes a separate product market.

4.4.2. Geographic market definition

(33) In line with previous Commission decisions, the Notifying Party considers the relevant geographic market for call termination services on fixed networks to be national in scope. This is primarily due to regulatory barriers as the geographic scope of licenses is in principle limited to areas which do not extend beyond the borders of a Member State.

(34) In previous decisions, the Commission considered the geographic market to be national in scope.

(35) The Commission concludes that the wholesale market for fixed call termination services is national in scope, considering that the geographic scope of each wholesale market for call termination should correspond to the dimensions of the operator’s network, which is limited to national borders due to regulatory barriers.

4.5. Wholesale international roaming services

(36) For a provider of retail mobile services to be able to provide its end customers with telecommunications services outside their home countries, it enters into wholesale roaming agreements with providers of wholesale international roaming on other national markets. Roaming consists of both terminating calls and originating calls.

(37) Retail mobile service providers sometimes have preferred roaming partners in certain countries. This means that the preferred partners' network will be used in the first instance when it has coverage and the mobile user has not manually chosen a different network. A home network will normally have multiple agreements with operators in a particular country in order to provide optimal coverage.

4.5.1. Product market definition

(38) In line with previous Commission decisions, the Notifying Party submits that there is a relevant product market for wholesale international roaming services, comprising both terminating calls and originating calls.

(39) Wholesale international roaming services are regulated. Mobile network operators must meet all reasonable requests for wholesale roaming access under a reference offer and wholesale charges for the making of regulated roaming services (voice, message and data roaming) are capped.

5. COMPETITIVE ASSESSMENT

(44) According to the information submitted by the Notifying Party, the Transaction does not give rise to any horizontally affected markets.

(45) The Transaction gives rise to a number of vertically affected markets in the telecommunications sector, as can be seen from the following table:

Upstream markets Downstream markets

Wholesale mobile call termination (i) Retail mobile telecommunications services in: services in:

- Czech Republic (PPF)

- Hungary (Telenor)

- Slovakia (PPF)

- Bulgaria (Telenor)

(ii) Retail fixed telephony services in:

- Bulgaria (Telenor)

Wholesale mobile call termination (i) Retail mobile telecommunications services in: services in:

- Hungary (Telenor)

- Czech Republic (PPF)

- Bulgaria (Telenor)

- Slovakia (PPF)

(ii) Retail fixed telephony services in:

- Czech Republic (PPF)

- Slovakia (PPF)

Wholesale fixed call termination in: (i) Retail mobile telecommunications services in:

- Czech Republic (PPF)

- Hungary (Telenor)

- Slovakia (PPF)

- Bulgaria (Telenor)

(ii) Retail fixed telephony services in:

- Bulgaria (Telenor)

Wholesale fixed call termination in: (i) Retail mobile telecommunications services in:

- Bulgaria (Telenor)

- Czech Republic (PPF)

- Slovakia (PPF)

(ii) Retail fixed telephony services in:

- Czech Republic (PPF)

Commission Regulation (EC) No 802/2004 implementing Council Regulation (EC) No 139/2004 on the control of concentrations between undertakings (OJ L 336, 14.12.2013, p. 1-36).

Source: Form CO

5.1.1. The Notifying Party's views

(48) The Notifying Party submits that the Transaction cannot give rise to any competition concerns considering that:

- the markets for provision of wholesale mobile call termination services are subject to an ex ante regulation by national telecommunications authorities which makes it technically impossible to refuse access to or price discriminate against other network operators;

- in the vast majority of cases it is impossible to know the identity of the customer purchasing termination because international calls are mostly made over international carriers who act as intermediaries between the telecommunication operators;

- the call termination in the Czech Republic and Slovakia is only of minor importance to the Telenor Target Companies and their competitors. Similarly, the call termination in Bulgaria and Hungary appears to be of negligible importance to PPF and their competitors.

5.1.2. The Commission's assessment

(49) The Commission considers that the Transaction does not give rise to serious doubts as to its compatibility with the internal market in relation to the vertical link between the upstream markets for wholesale mobile call termination services and the downstream markets for retail supply of fixed telephony services and retail supply of mobile telecommunication services, for the following reasons.

(50) First, the Commission notes that there are regulatory obligations applying to the wholesale mobile call termination markets. Those regulatory obligations include access to specific network facilities, transparency (including publication of draft interconnection agreements on the network operator’s website), non-discrimination and price control.

(51) Second, telephonic traffic flows between the Czech Republic, Slovakia, Hungary and Bulgaria are extremely limited and any increase by the merged entity of its termination charges (if possible without the need for regulatory approvals) would have little or no impact on the cost structure of the merged entities' competitors in these countries. Nor would the merged entity have the incentive to make such increases due to the small traffic volume concerned.

21 With respect to the Czech Republic, see Commission Decision of March 16, 2016 in case CZ/2016/1843, Wholesale market for the voice call termination on individual mobile networks in the Czech Republic and corresponding national market review performed by the national regulatory authority. With respect to Bulgaria, see Commission Decision of November 21, 2016 in case BG/2016/1924, Call termination on individual mobile telephone networks in Bulgaria and corresponding national market review performed by the national regulatory authority. With respect to Slovakia, see Commission Decision of December 15, 2016 in case SK/2016/1956, Wholesale voice call termination on individual mobile networks in Slovakia and corresponding national market review performed by the national regulatory authority. With respect to Hungary, see Commission Decision of March 05, 2015 in case HU/2015/1705, Wholesale voice call termination on individual mobile networks in Hungary and corresponding national market review performed by the national regulatory authority.

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(52) Third, the Commission notes that none of the respondents to the market investigation raised any concerns related to vertical issues arising from the Transaction on the market for wholesale mobile call termination services on the one hand, and the retail supply of fixed telephony services and retail mobile telecommunications services on the other hand.

(53) In light of the analysis above, the Commission concludes that the Transaction does not give rise to serious doubts as to its compatibility with the internal market in relation to the vertical link between the upstream markets for wholesale mobile call termination services and the downstream markets for retail supply of fixed telephony services and retail supply of mobile telecommunications services.

5.2. Wholesale market for fixed call termination services – Retail market for fixed telephony services and retail market for mobile telecommunications services

(54) PPF is active on the market for wholesale fixed call termination services on its own networks in the Czech Republic and in Slovakia. The Telenor Target Companies are also active on this market in Bulgaria. The wholesale market for fixed call termination services where the Parties have a 100% market share in their respective networks ("one net – one market" principle) is upstream of the markets for the retail supply of fixed telephony services and for the retail supply of mobile telecommunications services, where the Parties have the market shares indicated in the tables in recital (47) above.

5.2.1. The Notifying Party's views

(55) The Notifying Party submits that the Transaction cannot give rise to any competition concerns considering that:

- the markets for provision of wholesale fixed call termination services are subject to an ex ante regulation by national telecommunications authorities which makes it technically impossible to refuse access to or price discriminate against other network operators;

- in the vast majority of cases it is impossible to know the identity of the customer purchasing termination because international calls are mostly made over international carriers who act as intermediaries between the telecommunication operators;

- the call termination in the Czech Republic and Slovakia is only of minor importance to the Telenor Target Companies and their competitors. Similarly, the call termination in Bulgaria and Hungary appears to be of negligible importance to PPF and their competitors.

5.2.2. The Commission's assessment

(56) First, the Commission notes that there are regulatory obligations applying to the wholesale fixed call termination markets. Those regulatory obligations include

22 With respect to the Czech Republic, see Commission Decision of November 24, 2016 in case CZ/2016/1928, Wholesale markets for call termination on individual public telephone networks provided at a fixed location in the Czech Republic – remedies and corresponding national market review performed by the national regulatory authority. With respect to Bulgaria, see Commission

access to specific network facilities, transparency (including publication of draft interconnection agreements on the network operator’s website), non-discrimination and price control.

(57) Second, telephonic traffic flows between the Czech Republic, Slovakia, Hungary and Bulgaria are extremely limited and any increase by the merged entity of its termination charges (if possible without the need for regulatory approvals) would have little or no impact on the cost structure of the merged entities' competitors in these countries. Nor would the merged entity have the incentive to make such increases due to the small traffic volume concerned.

(58) Third, the Commission notes that no respondent to the market investigation raised any issues related to vertical competition concerns arising from the Transaction on the market for fixed call termination services on the one hand, and the markets for retail supply of fixed telephony services and of mobile telecommunications services on the other hand.

(59) In light of the analysis above, the Commission concludes that the Transaction does not give rise to serious doubts as to its compatibility with the internal market in relation to the vertical link between the upstream markets for wholesale fixed call termination services and the downstream markets for retail supply of fixed telephony services and retail supply of mobile telecommunications services.

5.3. Wholesale market for international roaming services – Retail market for mobile telecommunications services

(60) PPF is active on the market for wholesale international roaming services on its own mobile networks in the Czech Republic and in Slovakia. The Telenor Target Companies are also active on this market on their own networks in Bulgaria and in Hungary. The wholesale market for international roaming services is upstream of the markets for the retail supply of mobile telecommunication services, where the Parties have the market shares indicated in the tables in recital (47) above.

5.3.1. The Notifying Party's views

(61) The Notifying Party submits that the Transaction cannot give rise to any competition concerns considering that:

- following the Transaction, the merged entity's competitors in the retail markets for mobile telecommunication services will continue to have at least two alternative operators in each of the Czech Republic, Slovakia, Bulgaria and Hungary from which to purchase international roaming services;

- roaming activities are subject to EU regulation which imposes a price cap on the wholesale prices that Mobile Network Operators ("MNOs") can charge from their roaming customers and includes obligation of MNOs to meet all reasonable requests for access to their network;

Decision of May 26, 2016 in case BG/2016/1862, Wholesale call termination on individual public telephone networks provided at a fixed location in Bulgaria and corresponding national market review performed by the national regulatory authority. With respect to Slovakia, see Commission Decision of February 22, 2018 in case SK/2018/2051, Wholesale voice call termination on individual public telephone networks provided at a fixed location in Slovakia – remedies and corresponding national market review performed by the national regulatory authority.

- The roaming charges in each interested Member State represent a very small percentage of the costs incurred by mobile operators. Therefore, any changes in the roaming costs will have no significant impact on the relevant competitors’ price structure;

- the revenues generated by PPF's end customers roaming in Bulgaria and Hungary, as well as by the Telenor Target Companies' end customers roaming in the Czech Republic and Slovakia represent less than [0-10]% of the total wholesale international roaming revenues generated by the mobile operators in the respective Member States.

5.3.2. The Commission's assessment

(62) The Commission considers that the Transaction does not give rise to serious doubts as to its compatibility with the internal market in relation to the vertical link between the upstream markets for wholesale international roaming services and the downstream markets for the retail supply of mobile telecommunication services.

(63) The Commission notes that the market for wholesale international roaming activities is subject to sector-specific Union regulation, which prevents mobile operators from refusing access to their network and from charging excessive termination fees. Under the Roaming Regulation, MNOs must meet all reasonable requests for wholesale roaming access and MNOs are bound by the price cap imposed by the Roaming Regulation on the wholesale prices that MNOs can charge from their roaming customers. Key obligations under the regulation include an obligation to meet all reasonable requests, an obligation to publish a reference offer, caps on wholesale and retail charges (for calls, SMS messages and data services), and transparency and information requirements. The Roaming Regulation therefore effectively prevents MNOs from refusing access to their respective network and from charging excessive termination fees.

(64) Furthermore, the Commission notes that no respondent to the market investigation raised any issues related to vertical competition concerns arising from the Transaction on the market for wholesale international roaming services on the one hand, and the market for retail supply of mobile telecommunications services on the other hand.

(65) In light of the analysis above, the Commission concludes that the Transaction does not give rise to serious doubts as to its compatibility with the internal market in relation to the vertical link between the upstream markets for wholesale international roaming services and the downstream markets for the retail supply of mobile telecommunication services.

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6. CONCLUSION

(66) For the above reasons, the European Commission has decided not to oppose the notified operation and to declare it compatible with the internal market and with the EEA Agreement. This decision is adopted in application of Article 6(1)(b) of the Merger Regulation and Article 57 of the EEA Agreement.

For the Commission

(Signed) Margrethe VESTAGER Member of the Commission

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