On March 6, 2020, the Commission approved Telecom Italia and Vodafone’s acquisition of joint control over INWIT, which will combine the companies’ 22,000 telecommunication towers in Italy.[1] The approval was obtained during Phase I and is conditioned on third-party access to the infrastructure.

Merger control approval for the INWIT joint venture

The joint venture consolidates Telecom Italia’s and Vodafone’s ‘passive’ tower infrastructure, i.e., the network elements which do not process or convert signals, such as towers, poles, masts and unpowered transmission elements, into one entity. This is intended to help achieve a quicker and more economical roll-out of 5G infrastructure in Italy.

The Commission found that the creation of such a large tower pool could reduce competition or shut out rival operators from renting space on the towers in municipalities with more than 35,000 inhabitants. The Commission’s concerns did not extend to rural regions, which may be because physical space for tower infrastructure is more readily accessible in these areas, there is limited overlaps in the parties’ networks in these districts and/or a finding of greater efficiencies when sharing infrastructure in areas with a lower population density.

To address the Commission’s concerns, Telecom Italia and Vodafone offered a set of commitments which essentially guarantee, for a period of eight years, competitors’ access to the joint venture’s towers in these more populated areas. Specifically, they undertook to offer space on 4,000 towers on reasonable and non-discriminatory terms and in accordance with a transparent procedure.

Tacit approval of network-sharing agreements

On January 17, 2020, the Commission also opened a preliminary investigation into a broader network-sharing agreement between the companies, which had been announced with the joint venture. Telecom Italia and Vodafone proposed to share the ‘active’ parts of their 2G, 4G and 5G networks (the signal processing equipment), while continuing to separately manage their spectrum rights and network performance, and to independently develop new products and services.

After engaging with the Commission, the companies agreed to limit their active sharing to smaller cities, towns and rural zones, omitting the most densely populated areas, on the basis that network sharing agreements create more efficiencies in less built-up areas. In less populated areas operators have fewer incentives to build separate networks, and network coverage would consequently become more limited.

The Commission, without formally closing its investigation, observed that the adjustments “seem prima facie appropriate to alleviate possible concerns.” In coming to this conclusion, the Commission specifically noted, amongst other observations, that there are five mobile network operators in Italy, more than in most other Member States. The Commission observed that while it is “generally supportive” of network sharing agreements, which can facilitate the roll-out of new technologies by alleviating the heavy cost of infrastructure investments, these arrangements also present competition risks as they require competitors to coordinate closely and exchange detailed information. Accordingly, “an appropriate balance must be found […] on a case- by-case basis,” taking into account several factors, including “the extent of sharing, the content of contractual arrangements as well as [the] specific market circumstances.”[2]

Close scrutiny of telecoms mergers and network sharing agreements

This decision along with the Commission’s accompanying remarks on network sharing agreements are a reminder of the potential challenges telecoms businesses will encounter when contemplating network sharing plans, either through consolidation or cooperation.

The Commission’s merger commitments in this case are relatively light compared to previous decisions in this sector, many of which involved four-to-three mergers and required extensive access remedies or divestitures.[3] This likely reflects the limited nature of the transaction, which only combined the parties’ passive network infrastructure, as opposed to their entire mobile telephony businesses. Even so, the Commission required the parties to provide access commitments in metropolitan areas.

Similarly, the Commission required Telecom Italia and Vodafone to scale back the geographic coverage of their broader network sharing agreement to the areas where they were most needed. This is in line with the Commission’s guidance on the need to balance the competition risks, and its approach in other cases. The Commission recently issued preliminary objections against a network sharing agreement between the two largest Czech operators, which covered all mobile technologies (2G, 3G and 4G) and the entire country excluding Prague and Brno.[4]

[1]      Vodafone/TIM/INWIT JV (Case COMP/M.9674), decision not yet published. See Commission Press Release IP/20/414.

[2]      Commission Press Release IP/20/414.

[3]      See Concurrences, Mobile telecommunications mergers in the EU – Remedies revisited, February 15, 2020, co-authored by Bernd Langeheine, Beatriz Martos Stevenson, and Jan Przerwa, available at: https://www.concurrences.com/en/review/issues/no-1-2020/articles/mobile-telecommunications-mergers-in-the- eu-remedies-revisited-92671-en.

[4]      See Commission Press Release of August 7, 2019, available at: https://ec.europa.eu/commission/presscorner/detail/en/IP_19_ 5110, covered in our August/ September 2019 EU Competition Law Newsletter, Similarly, the Belgian competition authority has issued interim measures while it investigates a network sharing partnership between Orange and Proximus, see, Belgian Competition Authority Press Release of January 10, 2020, available at: https://www. belgiancompetition.be/sites/default/files/content/download/files/20200110_press_release_2_bca.pdf.