CCA clears telecom merger between Telemach Hrvatska and OT-Optima Telekom

Within the meaning of the Competition Act the Croatian Competition Agency cleared in the first phase the concentration between the undertakings Telemach Hrvatska d.o.o. and OT-Optima Telekom d.d. By this transaction the CCA achieved the objective laid down in its decisions of 19 March 2014 and 9 June 2017 on conditionally approved concentration between HT and Optima and its decision of 9 June 2017 on conditionally approved concentration between Optima and H1, which entrusted the management over Optima to HT with the view to retaining Optima’s position in the market or creating a new operator that would be the third operator in the Croatian telecommunication market. Until July 2021 Optima’s businesses were managed by the undertaking Hrvatski telekom d.d. based on the decision of the CCA that defined the committments in order to retain Optima’s position in the relevant market as the third rival.

Telemach Hrvatska is part of United Group controlled by the undertaking BC Partners with its seat in London.

This is a vertical integration given the fact that both Telemach and Optima are active in vertically connected and complimentary markets.

By the implementation of this concentration Telemach enters the market in electronic communication in fixed-line network services where exclusively Optima has been present and thereby takes the market shares of Optima. The concentration will lead to minimum horizontal overlap with Optima, that is to say, in retail fixed broadband access market and subscription television market, where Telemach has been marginally present. It has been accordingly assessed that by the implementation of the concentration concerned market shares will not be increased in any of the relevant markets. By the acquisition of Optima, Telemach will provide integrated telecommunication services in fixed and mobile telephony able to offer convergent services as the third integrated telecommunication services rival competing in the Croatian telecom market.

Besides the electronic communication market where the concentration will produce most effects, through its connected undertakings, first of all the broadcaster Nova TV, Telemach is present in the TV advertising market where most significant competitors to its integrated undertakings are RTL and HRT.  Telemach is also present as a wholesaler in distribution TV channels in the Republic of Croatia, where Optima and other electronic communication operators participate as buyers.

Therefore, taking into the consideration the potential effects of the implementation of the concentration concerned and the market share of Nova TV in the TV advertising market, the CCA analysed the potential unilateral vertical effects i.e., unilateral practices that are likely to foreclose competitors in the TV advertising market as a consequence of the implementation of the concentration concerned.

The CCA received one reply to the request for information of 1 December 2021 that was submitted by one of the competitors (telecom operators) regarding the TV advertising market, carried out the necessary analysis of the matter concerned and found that it could be reasonably assumed that the providers of electronic communication services Telemach and Optima, by its presence in the TV advertising market as a downstream market of the electronic communication market through its connected undertaking Nova TV, could not threaten the position of the leading rivals HT and A1, given that Optima and Telemach were the smallest mobile and fixed-line operators in the Croatian market.

In the course of the assessment the CCA also sought expert opinion of the Croatian Regulatory Authority for Network Industries (HAKOM) as a specific regulator in the electronic communication market. HAKOM found in its opinion that in the future synergies are expected to be achieved of the integration concerned in the context of sustainability and trade-offs in the development of the Croatian electronic communication market.

In the case concerned the CCA also sought the expert opinion of the Agency for Electronic Media (AEM) as a specific regulator in electronic media markets. AEM confirmed that the implementation of the concentration concerned did not contravene with the provisions on media mergers under the Electronic Media Act ensuring pluralism and diversity of the electronic media, taking into account the relatively small market share and effect of the provider of media services Optima on the market concerned.

The TV advertising market in the Republic of Croatia will remain under scrutiny of the CCA within its scope of action.

Taking everything into account, it is expected that the concentration concerned will have positive effects based particularly on the fact that the third rival is retained in the electronic communication fixed-line network market and that the third integrated operator in mobile and fixed-line network will be created, that will be able to more effectively compete with the incumbent leading operators by offering convergent services. The creation of the third fully integrated competitor in the electronic communication sector ascertains potential efficiencies based on the ability of the integrated operators in mobile and fixed-line networks to offer convergent products, ensuring a counter-balance to already existing competitors to the advantage of the consumers. The creation of the third rival in the market where there have been only two competitors for a significant period of time will therefore produce efficiencies, contribute to strengthening of competition and consequently benefit the consumers.