MERGERS: AMO SR approved the joint venture of companies SWAN, a.s., and BENESTRA, s. r. o.

05.04.2018
On 21 march 2018 the Antimonopoly Office of the Slovak Republic, the Division of Concentrations, (hereafter "the Office") approved a merger grounded in the creation of a full-function joint venture jointly controlled by undertakings Ing. Juraj Ondriš and Ing. Pavol Ondriš, the Slovak Republic (hereafter "Notifier 1 and 2") on one hand and undertaking Sandberg Capital, správ. spol., a.s., Bratislava (hereafter "Notifier 3", together with Notifier 1 and 2 "Notifiers") on the other hand, the joint venture being formed by companies SWAN, a.s., Bratislava (hereafter "Swan"), SK Consortium 2 S.á.r.l., the Grand Duchy of Luxembourg (hereafter "SKC2"), SK Holdco B.V., the Netherlands (hereafter "SKH"), Carduelis 2 B.V., the Netherlands (hereafter "C2") and BENESTRA, s. r. o., Bratislava (hereafter "Benestra").
 
The joint venture will include the company Benestra from the economic group of Notifier 3 as well as the companies SKC2, SKH and C2 which are holding companies. The joint venture will include the company Swan of the Notifiers 1 and 2 which indirectly jointly controlled the company before the merger.
 
Prior to the merger, through the company Swan, the Notifiers 1 and 2 directly/indirectly jointly/exclusively controlled several companies. Based on the submitted documentation and information, the Office found out that creating the joint venture will result in the change in the control also over all the undertakings that prior to the merger were controlled by the Notifiers 1 and 2 through the undertaking Swan, thus also the Notifier 3 will acquire indirect control over these companies.
 
In the part devoted to the assessment of the impacts of the merger, the Office assessed the activities of Notifiers 1 and 2 as well as the activities of the undertakings SWAN Mobile, a. s., Bratislava, Amtel Slovensko, s.r.o., Bratislava and CNC, a.s., Bratislava. These undertakings, however, are not among the undertakings which are the subject to the change of control over them as the result of creating the joint venture.
 
Notifiers 1 and 2 jointly control several companies operating in various fields or are engaged in a number of activities, especially in the field of electronic communications and also in activities such as systems integration, IT security, production and sale of customized information systems, national registration of Internet domains, sale of mobile applications, local retransmission, operation of web portals and others.
 
Notifier 3 is a management company, creating and managing alternative investment funds and foreign alternative funds. The economic group which includes Notifier 3 operates primarily in the field of electronic communications, software development and supply, information systems, food and consumer goods retail, plant and animal primary production.
 
In the view of the activities of the Notifiers, the Office focused on assessing the impacts of the merger in relation to the field of electronic communications. In the merger notification were identified several relevant markets or segments of goods/services in the field of electronic communications in which the Notifiers 1 and 2 and/or the Notifier 3, respectively companies belonging to the Notifiers' economic groups operate. For several segments/markets, due to the structure of these markets and the position of the Notifiers, it was possible to assess the merger as unproblematic already from the information given in the notification.
 
The Office focused deeper on segments identified by the Notifiers as the wholesale market for the lease of circuits, services of complex ICT solutions, retail markets in relation to fixed internet access (with possible breakdown by customer type - referred to as services for mass market and for business customers) and services of individual data transfer solutions, business customers.
 
Within these segments, the Office both defined the relevant markets or their alternatives and evaluated the impacts of the merger after a detailed analysis. These are segments in which the activities of the merging parties overlap horizontally and they are vertically linked to each other, too, whereas competing providers of electronic communications networks and services expressed a number of concerns about the negative impacts of the merger in these fields. In the view of the abovementioned, the Office assessed both the horizontal effects of the merger on a wholesale as well as on a retail, regrading high-quality fixed internet access services (including certain types of services in the fields aforementioned by the Notifiers and provided to business customers) and, on the other hand, it assessed also the consequences of the vertical link between these Notifiers´ activities.
 
Within assessing the horizontal effects of the merger on retail provision of high-quality fixed internet access (hereafter "retail VKP"), based on competitors´ objections the Office focused on potential bid constraint as a result of the reduction in the number of players and of the increase in the independence of the merging parties, on the consequences of infrastructure cummulation, in particular radio infrastructure in licensed bands - specifically for future 5th generation technologies (hereafter "5G") and on the provision of retail VKP for public sector customers.
 
The Office primarily regarded the current market structure. It also found out that this segment is specific especially for the higher prices of products and services provided for business customers, which also means that the ownership of the necessary infrastructure may not be a competitive advantage (often the completion of the infrastructure is on the basis of the contract); furthermore, most of the orders are based on tenders. Moreover, after the merger, the players on the background of which is a strong international group with many years of experience in electronic communications remain in the market.
 
In relation to infrastructure cumulation, the Office found out that the merging parties do not have such an optical infrastructure that would give them a more competitive advantage and that also after the merger there will be undertakings with more extensive infrastructure on the market. Concerning radio frequencies in 3.5 GHz and 3.7 GHz licensed bands, which were primarily contested by competitors, from the data submitted by the Notifiers, some competitors and also by the regulator in this field, the Office found out that also several competitors have licenses in the bands concerned (even in a greater extent) and that there are also other frequency bands in which the same types of services can be provided. Specifically for the deployment of future 5G technologies the Office found that the frequency bands on which these services will be provided have not been standardized so far, whereas licenses for those bands in the hands of the Notifiers are limited in time. Furthermore, the regulator stated that it had no knowledge that the merging parties and the companies in their economic groups had a unique infrastructure that would give them competitive advantage over other businesses.
 
In connection to the provision of retail VKP for the public sector, the Office found out that these products and services do not constitute a separate market but are part of a wider market in this field for business customers. Nor this case was joining of two strong players specifically in this field, but only the group of Notifiers 1 and 2, not Notifier 3, took a more prominent position. Except the merging parties (especially of the group of the Notifier 1 and 2) also other relevant players with significant activities in relation to public sector entities operate in this field.
 
Within the assessment of the merger´s horizontal effects on wholesale level of the provision of high-quality access to the Internet (hereafter "the wholesale VKP"), the Office found out that the undertaking Benestra is one of the major wholesale players in the market, but the undertaking Swan operates only to a limited extent on this market. Due to the merger, the increase will be minimal. At the same time, several undertakings will remain active on the market and the distance from the joint venture created by the merger will not increase significantly. Thus, the undertaking Swan, by operating on the wholesale VKP market, does not exert such competitive pressure on Benestra, the elimination of which would lead to a change in the competitive conditions on the wholesale VKP market and thus to price increases or other negative impacts on the provision of wholesale VKP services. In connection to the horizontal assessment of the merger on the wholesale VKP market, the Office also found that the extent of the infrastructure of the undertakings operating on this market does not correspond to their competitive significance or the role they play in the relevant market. On the basis of the documentation and information obtained druing the administrative proceedings, the undertaking Benestra uses its infrastructure suitable for providing high-quality internet access services to provide outsourced wholesale services to a greater extent, the undertaking Swan uses its infrastructure to compete on the wholesale market for high-quality access only limitedly and it primarily provides it in the form of self-supply to compete in the retail market for high-quality access.
 
Within assessing the vertical effects of the merger concerned, the Office assessed whether the merger would not result in the closure/restriction of the access to inputs or buyers.
 
In relation to the closure/limitation of access to wholesale access in this field, the Office assessed mainly the position of the merging parties on the wholesale VKP market, the position of other undertakings on this market and the related availability of wholesale VKP services, the importance of high-quality internet access services purchased by wholesalers for the provision of services of retail VKP and the impact of merger on the competitiveness of the undertakings in the retail VKP market and thus on competition. In view of the above mentioned, the Office concluded that it is unlikely that the closure/restriction of the access to wholesale inputs would have such an impact on the provision of a retail VKP that it would lead to negative impacts on competition in the relevant market.
 
In relation to the closure of access to customers, the Office assessed whether the refusal of the undertakings Swan and Benestra to take a wholesale VKP from their competitors in the wholesale market would impede access to a major customer base for these wholesale suppliers, thereby leading to worsening conditions of providing wholesale VKP and to weakening competitors of the merging parties in retail VKP and thus to negative impacts on competition in this retail market. The Office found that the undertakings Swan and Benestra were not an important customer base, as the undertaking Swan and Benestra were vertically integrated already prior to the merger and a long time they were acquiring the vast majority of high-quality access services internally. The merger would not lead to a significant change compared to the situation before it.
 
In relation to the assessment of the vertical effects of the merger in the field of VKP, the Office took into account also the fact that both merging parties operate both in the retail and wholesale (with different degree of operating of both groups of the Notifiers at given levels). As a result of the merger, there may only come to the shuffle of wholesale VKP supplies, when, for example, the fact that the undertakings Swan and Benestra will deliver more wholesale accesses internally could lead to the situation when their previous wholesale customers would become the new customer base for the undertakings which originally supplied services to Swan and Benestra (which reduces the concerns about closing the access to customers as well as the inputs). Similarly, also other undertakings operating in the wholesale access market are vertically integrated. The same infrastructure the undertakings use to provide wholesale high-quality access services is principally suited also for providing retail high-quality access services. Consequently, a potential rejection by the merging parties on the wholesale market would then lead to strengthening of the competitiveness of the vertically integrated undertakings in the retail market.
 
After the evaluation of the acquired documentation and information, the Office concluded that the merger asses is in line with the Article 12 Paragraph 1 of the Act No. 136/2001 Coll. on protection of competition, since it will not significantly impede effective competition on the relevant market, particularly as a result of creating or strengthening of a dominant position.
 
The decision came into force on 27 March 2018.
Last update:05.04.2018