3rd UPDATE: EU Probes Telefonica,Portugal Telecom Non-Compete Deal
January 24 2011 - 11:20AM
Dow Jones News
The European Union's top antitrust authority has begun
investigating an agreement between Spanish telecommunications
company Telefonica SA (TEF) and Portuguese peer Portugal Telecom
SGPS SA (PT) to ascertain whether they have broken competition
rules, it said Monday.
The European Commission probe is centered on whether the two
companies breached EU rules by agreeing not to compete with each
other in their respective home markets as part of a deal under the
terms of which Telefonica last year acquired control of Brazilian
mobile telephone company Vivo Participacoes SA (VIV), formerly a
joint venture with Portugal Telecom.
According to a deal-related document dated in June, the parties
had to "refrain from engaging or investing, directly or indirectly
through any affiliate, in any project in the telecommunication
business...that can be deemed to be in competition with the other
within the Iberian market" until at least Dec. 31, 2011.
The takeover itself isn't under investigation, the commission
said. A Telefonica spokesman declined to comment.
A representative for Portugal Telecom said the company was
notified by the European Commission of the probe and is "available
to clarify all the facts."
"The existence of many strategic partnerships [with Telefonica]
has never stopped the two companies from carrying normal
activities, and competing, in markets where they are present," the
representative added.
The probe will also focus on cooperation before the Vivo deal,
the commission said. In 1997, Telefonica and Portugal Telecom had
made an agreement to cooperate outside of the EU and the commission
now wants to find out whether that deal also included some
non-compete element for the EU, mainly Spain and Portugal.
Telefonica and Portugal Telecom said last July they had agreed
for PT to sell its stake in Vivo to Telefonica for EUR7.5
billion.
-By Alessandro Torello and Patricia Kowsmann, Dow Jones
Newswires; +32 2 741 14 88; alessandro.torello@dowjones.com
(David Roman in Madrid contributed to this article.)
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