EU Commission Clears Altice, Allianz and Omers' Covage Deal
November 30, 2020
The European Commission has approved, under the EU Merger Regulation, the proposed acquisition of Covage by SFR FTTH, a company jointly controlled by Altice, Allianz and Omers. The approval is conditional on full compliance with a commitments package offered by the Altice, Allianz and Omers.
Executive Vice-President Margrethe Vestager, in charge of competition policy, said: "Covage is the leading independent provider of wholesale access to fibre capacity in France. Particularly in low population density areas, where internet access is more difficult to obtain. It is important for local authorities to have alternative suppliers for the construction and management of high-quality fibre-to-the-office networks. Covage directly competes with the Altice owned company SFR on these markets, so we approved the acquisition of Covage thanks to comprehensive divestments to ensure that competition will remain to the benefit of local and international customers and consumers in France”.
Altice/SFR FTTH and Covage are leading fibre networks operators in France. Covage only sells fibre network accesses at the wholesale level while Altice is active both at the wholesale and retail levels. Allianz and Omers are financial investors jointly controlling SFR FTTH alongside Altice. Both Altice and Covage have a wide portfolio of wholesale fibre access services and compete, among others, in the provision of:
The Commission's investigation
The Commission's investigation found that the transaction, as initially notified, would have raised serious competition concerns. In particular:
The investigation confirmed that the proposed transaction did not raise competition concerns in any other markets. This was notably on the wholesale markets for FTTH access networks where, in particular, applicable laws and France's national telecoms regulator (ARCEP) have put several regulatory tools in place to keep the markets competitive.
The proposed remedies
To address the Commission's competition concerns, SFR FTTH offered the following commitments:
The final commitments address the competition concerns identified by the Commission regarding SFR FTTH's acquisition of Covage, and were significantly improved following the feedback received by market participants. The Commission therefore concluded that the proposed transaction, as modified by the commitments, no longer raises competition concerns.
The Commission's decision is conditional upon full compliance with the commitments.
Companies and products
Covage, based in France, is active in the design, financing and operation of high bandwidth fixed telecommunication networks (mainly fibre-to-the-home or “FTTH”) and the sale of related network services mainly deployed in low population density areas (i.e., essentially outside urban centers). Covage's networks are primarily operated under a public service delegation agreement concluded with local authorities (in the context of the French National Broadband Plan “Plan France Très Haut Débit” initiated in 2013) and on a wholesale-only model.
Through this model, Covage leases its network infrastructures to internet service providers (“ISP”) who, in turn, offer high-speed broadband connectivity to end customers of all types typically bundled with other value-added services.
Altice Group, based in France, is a multinational group specialising in telecom, content, media, entertainment and advertising. Altice Group delivers innovative, customer-centric products and solutions that connect its customers via fibre network and mobile broadband. Altice Group also provides enterprise digital solutions to business customers. Altice Group provides original content, TV shows and international, national and local news channels.
In the fixed telecommunication sector in France, Altice is mainly active via its subsidiaries SFR, Completel and SFR Fibre, both at the wholesale and retail level, for all types of customers as well as through Altice Technical Services.
SFR FTTH, based in France, is currently held by Altice and Piaf BidCo B.V., the latter currently being held by OMERS, Allianz, AXA Infrastructure Equity 1 AFS SAS and IST3 Investor Foundation and jointly controlled by OMERS and Allianz.
The main activity of SFR FTTH is the deployment and operation of FTTH networks and the sale of related network services in low-density areas. SFR FTTH is only active at the wholesale level.
Allianz Infrastructure Luxembourg II S.à.r.l., based in Luxembourg, is a wholly-owned subsidiary of Allianz SE, the ultimate parent company of the Allianz Group based in Germany. The Allianz Group provides fund and insurance products to retail and corporate clients globally.
OMERS Administration Corporation, based in Canada, indirectly owns 100% of the economic interests in OMERS Fibre Holdings B.V. and is one of Canada's largest defined benefit pension plans that invests and manages pensions in communities across the Province of Ontario, Canada through investments in infrastructure and private equity assets.
Merger control rules and procedures
The transaction was notified to the Commission on 8 October 2020.
The Commission has the duty to assess mergers and acquisitions involving companies with a turnover above certain thresholds (see Article 1 of the Merger Regulation) and to prevent concentrations that would significantly impede effective competition in the EEA or any substantial part of it.
The vast majority of notified mergers do not pose competition problems and are cleared after a routine review. From the moment a transaction is notified, the Commission generally has a total of 25 working days to decide whether to grant approval (Phase I) or to start an in-depth investigation (Phase II). If commitments are proposed in Phase I, the Commission has 10 additional working days, bringing the total duration of a Phase I case to 35 working days, such as in this case.