EC Investigates Non-Aggression Pact between Telefónica and PT
Brussels. Informed sources confirmed to this newspaper that European Commissioner for Competition Joaquín Almunia initiated last September an informal investigation into the agreements signed two months before by the Spanish and Portuguese operators Telefónica and Portugal Telecom (PT) in relation to the sale of Vivo.
Almunia’s department had doubted at the time that those agreements were consistent with the European rules on competition. Brussels seems to have confirmed such doubts and, according to consulted sources, could open an official inquiry this week.
The European Commission questions the legality of a pact that implies a commitment by the two companies to refrain from competing in their respective markets. According to that pact, Telefónica will not invest or participate in any activity in the Portuguese telecommunications market, while PT promises to do the same on Spanish terrain. The pact only excludes previous investments, such as Telefónica’s interest in a former PT subsidiary, and will be valid until the end of this year.
The Spanish company agreed to the above in order to smooth out PT’s resistance to the offer made to acquire Vivo.
In the eyes of Brussels, however, this type of pact constitutes an illegal distribution of the market, since it implies that the companies will relinquish competing with each other. The European Commission has already investigated similar agreements in the energy sector (between French and Italian companies) and in the nuclear sector (between Areva and Siemens).
A Tough Battle to Win Brazil
The open war between Telefónica and Portugal Telecom broke out last May 11, after the Portuguese operator made two announcements: 1) that it had received an offer of 5.7 billion dollars from the Spanish telco to buy its 30% share of Vivo, which would give Telefónica control over 60% of the leading Brazilian mobile operator, and 2) that the offer had been rejected outright.
But Telefónica did not give up. The Spanish and Portuguese companies engaged in a war that included threats, negotiations and rude behavior. PT’s reluctance to sell its Vivo stake led Telefónica not only to raise its bid to 6.5 billion dollars but also to put forward a full package of proposals and deals in order to tempt the Portuguese company. It was then (June 1st) that it decided to include a non-competition pact.
The war continued and intensified when the Portuguese government vetoed the sale after the shareholders had approved it. Finally, Telefónica won by offering 7.5 billion dollars.
Source: CincoDías.com