France Telecom/Editel/Linse - Telecommunications

United Kingdom

Background Acquisition by France Telecom, Editel, Ferrovial and Multitel of joint control over Linse. Linse is a Spanish telecommunications company set up in 1997 by France Telecom.

Assessment The parties identified the following as the markets where the transactions might have a certain impact on competition: local loop telephone services, operator access to local loop network (interconnection), business data communications, ISB services (connectivity to the Internet), global telecommunications services. The Commission did not go into details in the market definition.

Given the limit of extent of Linse’s operations and since Linse is a new entrant on the Spanish telephony sector where it is facing competition from much larger and well-established companies (Telefónica and Retevision), the Commission considered that the transaction does not create competition concerns.

The parties agreed that, on the one hand, the services they provide to Linse will be granted on terms at least as favourable as those which they offered to third parties. The parties will also have preferential rights to provide services to Linse in the area of their respective expertise.

As an ancillary restraint, the Commission authorised the first of the above clauses, while, as regards the preferential supply rights, the Commission considered that they are not necessary for the functioning of the joint venture.

The parties also agreed not to compete with Linse: (i) for the duration of the shareholders agreement and (ii) one year after the termination of the shareholders agreement or (iii) after one of the parties has ceased to be a shareholder. The Commission approved the non-compete clause under (iii) but considered that there is no reason why the non-compete clause for breach of contract should have longer duration than that for secession of a parent as a shareholder, and given the fact that the parties have considered that one year’s offices in case of secession of the same duration should apply in case of breach of contract. As regards clause (i), the Commission considered this as an ancillary restraint. For clause (ii), the Commission said that it can be considered as ancillary if Linse would not cease to exist as a result of the termination of the shareholders agreement. On the contrary, if Linse ceased to exist after the termination of the agreement, the non-compete clause under (ii) could not be applied. (Case n° COMP/M.1553, decision of 30/07/99, public version available February 2000).