Vj-176/1999/30

DEUTSCHE TELEKOM AG

(Concentration)

Summary

The direct owner of the Hungarian Telecommunications Plc (Magyar Távközlési Rt, hereinafter: MATÁV), the Deutsche Telekom AG (hereinafter: DT) applied for the authorisation of the Office of Economic Competition (hereinafter: OEC) to acquire control over MediaOne International B. V. and Westel Rádiótelefon Ltd.

The Undertakings Concerned

DT, a multinational undertaking, has indirect control over several Hungarian undertakings, out of direct control over MATÁV. Main activity of MATÁV is the wired telephone operation although it also owns 51-51 percent shares in Westel 450 and Westel 900 mobile service operators. The remaining 49-49 per cent shares of the Westels are owned by MediaOne. (Despite its 51 per cent ownership MATÁV does not have a sole controlling right over Westels since unanimous vote of members is required in the case of Westel 450 and 75 per cent majority voting is required in the case of Westel 900 to make decisions.)

Market Position of the Relevant Undertakings

MATÁV services cover the local, long-distance and international wired calls which operations it performs as a concessionaire under the Telecommunications Act. Under the concession contract, concluded in 1993, it has right to render international and domestic long-distance services as well as local calls on 74 per cent of the territory of the country, meaning 36 primer districts. (MATÁV has exclusive right for 8 years within the concession period of 25 years.)

On the market of mobile services the two undertakings concerned - Westel 450 (9 per cent market share) and Westel 900 (50 per cent market share) - have two competitors: Pannon GSM (41 per cent market share) and the new-comer V.R.A.M. Plc. (with no market share in the previous business year). Since the government has no plans to grant licences, new market entries are not expected in the near future.

Vertical Relations

Both regulatory requirements and the technical combination of wired and mobile services make necessary a good co-operation between MATÁV and the mobile service operators, which co-operation possibly becomes gradually more intensive as a consequence of the integration of mobile and wired services.

The Application

In its application DT argued that the planned concentration does not create and strengthen a dominant position on the market of mobile services since market shares will not be effected by it and, at the same time, economies of scale promote the quantitative and qualitative development of services of both Westel 450 and Westel 900.

Opinion of Competitors

In the consideration of one of three competitors the degree of the concentration would increase and the access to the rather limited infrastructure would become more difficult.

The Report of the Investigator

According to the report of the investigator, received by the applicant as well, the planned concentration strengthens the dominant position of MATÁV group by creating vertical relations and, in the absence of an appropriate regulation, makes the parties able to impede the development of effective competition. Therefore the investigator proposed the parties concerned to work out undertakings in the framework of which MATÁV should undertake (1) to assure a discrimination free market conduct in relation to Westel 450, Westel 900 and their competitors and (2) to avoid cross subsidisation by separated book-keeping of mobile and wired services.

Undertakings of the Applicant

In compliance with the proposal of the investigator, MATÁV undertook to apply the same conditions for the Westels and their competitors on the quantity, extent, frequency and other terms of services, and to send to the OEC for one year period the actual agreements made with its business partners. MATÁV also undertook to operate the Westels as separated economic units for that time until the regulation on handling separated book-keeping would have come into effect.
The decision of the Competition Council Examining the effect of the concentration to the economic competition the Competition Council established that it had no possible negative effect in horizontal relation since MATÁV and the Westels are acting on different markets. As far as the vertical relations are concerned, however, the undertakings in question are business partners which fact makes possible to increase the market shares. The Competition Council found the undertakings of the applicant sufficient to balance the negative effects on competition caused by the concentration therefore it authorised the concentration subjected to these undertakings.

February 28, 2000. Budapest

dr. Bodócsi András sk.
Fógel Jánosné dr. sk.
dr. Sólyom Eszter sk.
Szabó Györgyi