On August 19, 2024, the French Competition Authority (“FCA”) unconditionally cleared Bouygues Telecom’s acquisition of sole control of La Poste Telecom (together “the Parties”) through the acquisition of La Poste Group’s 51% stake. SFR owned the remaining 49% of La Poste Telecom and had a right of first refusal on La Poste Group’s shares that were for sale, as well as a right of approval over the buyer of those shares.[1] The acquisition was completed on November 15, 2024.[2]
Background
Bouygues Telecom, a subsidiary of Bouygues SA (the parent company of the Bouygues group), is a mobile network operator (“MNO”).[3] It provides fixed and mobile telephony, as well as broadband and ultra-broadband Internet services. Bouygues Telecom also offers wholesale services through Lycamobile, a mobile virtual network operator (“MVNO”).
La Poste Telecom, jointly controlled by the La Poste group (51% of the voting rights) and SFR (49%), is active in the electronic communications sector. As a “light” MVNO,[4] La Poste Telecom purchases access to mobile network services from SFR. It currently has a network access supply contract with SFR that runs until 2026.
On July 12, 2024, Bouygues Telecom notified the FCA of its intention to acquire sole control of La Poste Telecom through the acquisition of all its shares, both from La Poste Group and SFR.
The proposed acquisition resulted in a horizontal overlap between the Parties on the downstream mobile telephony retail market as the Parties both offer mobile telephony services to private and professional end-users. This includes the offer of mobile packages and pre-paid cards, and the offer of “global”, “premium” and “Sim-only Web-Only” services. It also created a vertical link between Bouygues Telecom – as an MNO operating in the upstream wholesale market for access and call origination on mobile networks – and La Poste Telecom – as an MVNO operating in the downstream market for the retail and distribution of telephony products and services.
The FCA’s Decision
Relevant markets. The FCA defined the relevant markets as (i) the upstream wholesale market for access and call origination on mobile networks,[5] and (ii) the downstream mobile telephony market, which includes both the retail (business-to-consumer sales) and the distribution (business-to-business sales) of mobile telephony products and services. The FCA departed from its previous approach[6] by considering the retail and distribution aspect as part of a single downstream market. The FCA found that recent market developments do not warrant distinguishing retail from distribution anymore because (i) most players in the mobile telephony retail segment now also act as distributors; (ii) MNOs propose uniform mobile telephony offers with identical rates across all of their distribution channels, a trend which has been reinforced with the rise of distance sales (i.e., sales of telephony products and services via the internet and the phone); and (iii) this approach aligns with the European Commission (the “Commission”), which no longer distinguishes between the two markets.[7]
Minimal impact on the competitive landscape due to limited market shares. In the downstream mobile telephony retail market, where the Parties’ activities overlap, the FCA concluded that the transaction would result in a minimal change in the competitive landscape, because La Poste Telecom holds a negligible market share (less than 5%) while Bouygues Telecom hods a share of 20-30%. In addition, the new entity will continue to face competition from the three main MNOs, namelyOrange, SFR, and Free, which together control nearly 70% of the mobile telephony market in mainland France. The FCA thus found that consumers will continue to have credible alternatives to the new entity’s services.
Limited importance of physical distribution network. La Poste Groupe owns a vast network of post offices and banking agencies across France which distribute La Poste’s mobile telephony services. The FCA noted that the transaction would give Bouygues Telecom access to this large physical distribution network, while Bouygues Telecom already owns exclusive distribution channels, including CIC and Crédit Mutuel bank branches and Bouygues Telecom boutiques, all of which already sell Bouygues Telecom’s mobile offers. The FCA found that, as a result, the new entity would have an extensive physical network throughout the country, particularly in rural areas.
However, the FCA considered that this would not raise a significant competitive concern. The FCA found that an extensive physical network was not essential to compete in the market, because of the importance of distance sales. Indeed, distance sales account for 65% to 75% of MNOs’ sales and up to 95% of MVNOs’ sales. The FCA thus found that distance sales would remain a viable and growing alternative to the new entity’s services post-transaction, including in rural areas where Bouygues Telecom’s competitors do not have physical presence.
Absence of anticompetitive vertical effects. As noted above, the transaction created a vertical link between Bouygues Telecom and La Poste Telecom, since Bouygues, as an MNO, supplies airtime to MVNOs that compete with La Poste Telecom. The FCA examined whether this vertical link could raise potential input foreclosure concerns, with Bouygues Telecom denying or worsening access to its network to MVNOs competing with La Poste Telecom compared to the conditions offered to La Poste Telecom.
However, the FCA concluded that the transaction would not lead to such input foreclosure. The FCA found that Bouygues Telecom would not have the ability or incentive to engage in such strategy and in any event such strategy would not affect the current access conditions of other MVNOs, because of: (i) existing regulatory obligations, i.e., ARCEP’s frequency-licensing decisions impose a series of commitments on MNOs, mainly concerning contracts between MNOs and MVNOs, including on pricing, (ii) other MNOs, such as Orange and SFR, which will continue to offer wholesale market alternatives; and (iii) a lack of financial incentives for Bouygues Telecom, because an input foreclosure strategy would result in a loss of revenue from MVNOs that would not be offset by the potential additional revenues generated by La Poste Telecom.
Takeaways
With the decision, the FCA acknowledged the need to update its market definition in the telecoms sector to account for the increasing importance of distance sales in the retail/distribution of telephony mobile products and services. The FCA thereby aligned its decisional practice with that of the Commission. By authorizing the acquisition of La Poste Telecom by Bouygues Telecom, the FCA has facilitated the vertical integration of an MNO and an MVNO, in line with the European Union’s objective of creating a single digital telecommunications market through economies of scale and consolidation of telecoms operators.[8] The decision concerns one of the many recent consolidations in the telecoms sector in Europe, further to Orange/Voo,[9] Orange-MasMovil,[10] and in the UK Vodafone/Three.[11]
[1] FCA Decision No. 24-DCC-185 of August 9, 2024 regarding the acquisition of sole control of La Poste Telecom by Bouygues Telecom.
[2] See LaPosteGroupe’s website, “Finalisation de la cession de La Poste Telecom”, available here.
[3] An MNO is a mobile operator that owns the frequencies and the mobile telephony network infrastructures.
[4] Unlike a “full” MVNO, a “light” MVNO does not own core network elements such as routing and relaying communication between different network nodes. Instead, a light MVNO manages few technical platforms and buys access services and end-to-end calls from its host operator, including call origination, routing, and termination.
[5] FCA Decision No. 20-DCC-191 of December 22, 2020 regarding the exclusive control acquisition of Euro Information Telecom (EIT) by Bouygues Telecom group, Liberty Global/Fluvius/Netco (Case COMP/M.10994), Commission decision of May 30, 2023, and Tele2/Com Hem Holding (Case COMP/M8842), Commission decision of October 8, 2018.
[6] FCA Decision No. 06-D-10 of May 12, 2006, concerning practices implemented by Bouygues Télécom against the wholesaler Stock-Com, and FCA Decision No. 20-DCC-191 of December 22, 2020 regarding the exclusive control acquisition of Euro Information Telecom (EIT) by Bouygues Telecom group.
[7] FCA Decision No. 24-DCC-185 of August 9, 2024 regarding the acquisition of sole control of La Poste Telecom by Bouygues Telecom, paras. 22-25, and Orange/VOO/Brutélé (Case COMP/M.10663), Commission decision of March 20, 2023.
[8] Draghi Report, The future of European competitiveness, Part B. Section 1. Chapter 3, High-speed/capacity broadband networks, September 2024, p. 75 and Part A. Chapter 2. A competitiveness strategy for Europe, p. 27.
[9] Orange/VOO/Brutélé (Case COMP/M.10663), Commission decision of March 20, 2023.
[10] Orange/MásMóvil/JV (Case COMP/M.10896), Commission decision of February 20, 2024.
[11] Vodafone/Three, CMA decision of December 5, 2024.