The European Commission approved on Wednesday the proposed acquisition of Telekom Romania Communications (TRMC) by Orange SA. The approval comes with one condition, a statement from the EU executive said. Orange will take over the fixed communications division – formerly Romtelecom – while the mobile communications division – formerly Cosmote – remains under the Telekom umbrella.
The European Commission says that the approval of the deal is conditional on the divestment of Telekom Romania Communications’ 30% minority stake in the mobile division, which is a direct competitor of Orange.
The Commission’s Vice-President Margrethe Vestager, responsible for competition policy, said that: “Europeans need access to fast and reliable communications services with sufficient alternatives in the market. With this decision and the commitments offered by Orange, the Romanian telecom market will continue to offer high quality communications services at competitive prices”.
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Orange’s main activities are related to mobile telecommunications, while Telekom Romania Communications (TKR) is mainly active in fixed and TV telecommunications. TKR is indirectly controlled by Deutsche Telekom and holds a 30% minority stake in TRMC, one of the four main mobile operators active in Romania.
The Commission’s investigation
Following its investigation, the Commission found that the transaction as originally notified would have raised serious competition concerns in the market of retail providers of mobile telecommunications services. Specifically, Orange would have acquired TKR’s 30% minority stake in TRMC, one of its main competitors in this market. This could have reduced Orange’s incentives to compete with TRMC, given Orange access to commercially sensitive information about its competitor, and would have allowed it to block significant investments by TRMC or the acquisition of the operator by a strategic buyer.
In addition, the Commission investigated potential competition concerns in other markets, such as the market for the provision of fixed and mobile converged services (“FMC”), the retail market for connectivity services for business customers, and the wholesale market for the provision and acquisition of TV channels.
In all these markets, the Commission found that the merged entity would continue to face significant competition from other players and that customers would have sufficient alternatives. In particular as regards the FMC services, the transaction would bring benefits by allowing the merged entity to offer such services more efficiently.
Proposed corrective measures
In order to address the competition concerns identified by the Commission in relation to Orange’s proposed acquisition of a 30% minority stake in TRMC, Orange has offered:
- To divest TKR’s 30% minority stake in TRMC to Hellenic Telecommunications Organisation S.A. (“OTE”), which is the current majority shareholder of TRMC and a subsidiary of DT;
- Not to implement the transaction before TKR and OTE have reached a binding divestiture agreement, before the Commission has approved both the appointment of OTE as the suitable purchaser and the approval of the divestiture agreement and, finally, before the minority stake is transferred to OTE.
These structural commitments fully remove the competition concerns identified by the Commission in the market for the retail provision of mobile telecommunications services. The Commission has therefore concluded that the proposed transaction, as modified by the commitments, no longer raises competition concerns. The decision is subject to full compliance with the commitments.