NMa: acquisition of Tiscali by KPN requires further investigation

The Netherlands Competition Authority (NMa) will further investigate the anticipated acquisition of Tiscali B.V. by KPN Telecom B.V. The Authority has concluded after an initial investigation that the acquisition possibly impedes competition in the market for broadband internet. Therefore, the Authority has decided that this acquisition requires a license. As soon as KPN submits a license application, the NMa will further investigate the acquisition's impact on competition.

Tiscali operates as an internet service provider (ISP) and provides internet services to consumers and other end users (the retail market). Tiscali also deploys its own DSL-network, which offers services to other ISPs, the so-called wholesale market. KPN's market share will increase by 5 per cent in both broadband markets, which raises the market share to about 50 per cent.

It appears from the initial investigation that the acquisition does not seem to leave Tiscali's wholesale customers any viable options for buying services. Also, entry barriers to setting up an alternative DSL network seem high. Furthermore, the acquisition will reduce remaining DSL players' joint opportunity to increase market power. As a result, it is to be expected that ISPs will become less competitive. It is not to be expected as yet that the various remaining cable companies and DSL parties can provide sufficient counterbalance to KPN.

On 8 December 2006 the NMa cleared the merger of Casema, Essent and Multikabel. These cable companies have a significantly smaller joint market share in the market for broadband internet.

If KPN submits a license application, the NMa shall decide within a 13-day period whether or not the acquisition will be cleared.

In instances where mergers and acquisitions exceed specified turnover thresholds, the NMa assesses whether the merger or acquisition creates or strengthens a dominant position. Such a dominant position may have detrimental effects on the price, quality and diversity of supplies. In that case the NMa may impose conditions on, or decide not to clear, a merger.