EC refers Enfostrada acquisition to Italy’s Competition Authority

Jan. 22, 2001à‚–The European Commission said it will refer to the Italian Competition Authority at its request, examination of the impact of the proposed acquisition of Infostrada by Enel and France Telecom on the Italian electricity sector.

The electricity market is currently being liberalized throughout the European Union, but Enel still has a dominant position in Italy, leading the Italian authority to fear it might be able to protect its position in the electricity market by offering joint utility services.

After a 1-month review, the Commission determined the combination would pose no competition problems for the telecommunications and internet markets, clearing these aspects of the deal. Under Italian law, the Authority has 30 days to decide whether to clear the deal or extend its probe for another 45 days.

The deal concerns the acquisition by Enel Holding SPA of Infostrada SPA from Vodafone PLC and the subsequent merger of Infostrada into Wind Telecomunicazioni SPA, a full function joint venture between Enel and France T௿½com.

France T௿½com provides a full range of telecommunications and internet services, primarily in France. The transaction will not change the present joint control over Wind since Enel and France T௿½com will continue to jointly control the merged company, the commission found.

Enel is the principal provider of electricity in Italy, both to domestic and industrial users and is active in the Italian telecommunications market through Wind.

Infostrada provides fixed line telecommunications services, including voice telephony, data transmission capacity, and internet services in Italy. The transaction will creates overlaps in the fixed line telecommunications and internet services markets in Italy.

However, the Commission said, given the parties’ low market shares and the existence of a number of significant competitors in these areas, the overlapping services are not expected create a dominant position in the marketplace.

The Italian competition authority on Dec. 20 asked the European Commission to refer the examination of certain aspects of the concentration to Italy. It argued the acquisition of Infostrada would allow Enel to defend or strengthen its dominant position in the electricity market.

The Authority took the position Enel, by jointly offering utilities and telecommunications services, and in particular using strategies such as joint billing and joint promotion of the bundled services, would be able to “lock in” current electricity customers, substantially reducing the impact of the liberalization on the Italian electricity markets.

According to the Authority, Infostrada is a significant supplier to small and medium enterprises who would be particularly attracted by a “one stop shop” offer of utilities services and telecommunications services. In referring the case, the Commission said the Italian Competition Authority is best placed to carry out the investigation and has, therefore, not taken a final position on this issue.

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