The Competition Authority has with decision Today, the acquisition by ITP ehf. of certain passive telecommunications infrastructure from Sýn hf. and Nova hf. was approved. ITP is ultimately controlled by Digital Bridge Group Inc. (formerly Colony Capital Inc.), a US-based asset management company that specialises in, among other things, investments in digital infrastructure. Sýn and Nova are Icelandic telecommunications companies, but together they have operated a mobile radio transmission network through Sendafélagið ehf., pursuant to a decision by the Competition Authority. No. 14/2015.
Specifically, the merger involves Digital Bridge's acquisition of almost all of the major transmitter sites operated by Sýn and Nova today. This is an acquisition of the telecommunications companies' so-called passive infrastructure, i.e. properties, masts and other equipment that is not considered active equipment. Thus, the transmitters, cables and other active equipment of Sýn and Nova are not part of the acquisition. Following the merger, the newly established company ITP will lease the facilities back to the telecommunications companies on the basis of a service agreement.
The purchase is limited to inactive infrastructure
The merger transfers the base stations in question from Sýn and Nova to an independent company, ITP, which will have an incentive to offer as many users as possible the opportunity to use the facility. Following the merger, there will therefore be no ownership links between the infrastructure in question and the telecommunications companies. Despite these positive effects, the Competition Authority considered it important to subject several aspects of the merger to a more detailed examination, in particular the following:
- The duration of service agreements, ITP's cooperation with Sýn and Nova following the merger, and the effects of the constraints inherent in such agreements and cooperation.
- The context of the aforementioned agreements and the pricing of the acquired business, and whether there was a risk that the merging parties would have an incentive to increase the price of services in the long term.
- At the conclusion of the investigation, the acquisition of Míla by Ardian France SA was announced, and it was then considered whether the buyers in both cases had links due to other investments, which would have to be taken into account when assessing this merger.
Following an investigation into the above, the Competition Authority has concluded that there are no grounds for intervention in respect of the merger. The conclusion is based, in particular, on the following:
- The acquisition is limited to passive infrastructure. An independent market for the leasing of facilities for digital telecommunications equipment and other potential equipment at larger transmission sites is developing in this country, and it is unclear how it will evolve.
- The merger will not result in a dominant position in the relevant market.
- As the buyer does not operate in other telecommunications service markets, there is a likelihood that it would have an incentive to offer competitors of Nova and Sýn, or other telecommunications companies, access to the infrastructure, provided that no agreements or interests stand in the way. This can lead to increased efficiency and lower barriers to entry.
- The Competition Authority considered it necessary to conduct a detailed review of ITP's service agreements with Sýn and Nova following the merger. The Competition Authority, among other things, examined the structure of the contracts and whether there was a risk that they could lead to price increases for the service. In the authority's view, this risk is not considered to be present, for example, due to the structure of the contracts and the fact that the combined company will be subject to significant competitive pressure from Síminn and Míla.
- The Competition Authority also examined the duration of the service agreements, which is rather long. Given the circumstances of the case, the Authority did not consider it necessary to intervene regarding the duration or any other substantive provisions of the agreements. Should it later transpire that the agreements in question may be harming competition, the Competition Authority will consider whether there are grounds to intervene in respect of them on the basis of other provisions of the Competition Act.
- The Competition Authority requested information about Digital Bridge's collaboration with Ardian, a prospective buyer of Míla, the infrastructure company of Síminn. According to the merger parties, this is a minor collaboration with little ownership overlap, as Ardian holds a negligible stake in the projects in which both companies have invested. In the view of the Competition Authority, it is extremely important that the independence of the companies that invest in telecommunications infrastructure in Iceland is guaranteed. The authority intends to take a closer look at these investor connections in its investigation into the acquisition of Míla.
