Antitrust: Commission accepts commitments from T-Mobile CZ, CETIN and O2 CZ on Czech network sharing

The European Commission has made commitments offered by T-Mobile CZ, CETIN and O2 CZ, as well as their parent companies Deutsche Telekom and PPF Group, legally binding under EU antitrust rules. The companies must ensure that their network sharing agreements do not reduce infrastructure competition which enables competition and innovation in the wholesale and retail telecommunications markets in Czechia.

Executive Vice-President Margrethe Vestager, in charge of competition policy, said: “Network sharing agreements bring efficiencies, such as faster roll-out, cost savings and coverage in rural areas. But such cooperation can also dampen the incentives of mobile operators to independently improve their networks and services. The network sharing agreements between T-Mobile CZ, CETIN and O2 CZ did not strike the right balance for Czech mobile users. So today, the Commission made binding commitments offered by T-Mobile CZ, CETIN and O2 CZ that will keep the benefits of network sharing whilst removing technical and financial disincentives to unilateral deployments and limiting information exchange, all to the benefit of Czech mobile users.

O2 CZ and T-Mobile CZ are major operators in the Czech retail and wholesale mobile telecommunications market. O2 CZ’s mobile infrastructure has been transferred to CETIN, a network infrastructure company belonging to the same corporate group.

The Commission’s concerns

In its preliminary assessment, the Commission found that the network sharing agreements (‘NSAs’) between CETIN and T-Mobile CZ as well as the Mobile Services Agreement (‘MNSA’) concluded between O2 CZ and CETIN could have breached Article 101(1) of the Treaty on the Functioning of the EU (‘TFEU’), which prohibits anti-competitive agreements.

Under the NSAs, T-Mobile manages the mobile telecommunications network in West Czechia and CETIN manages the network in East Czechia. Each provides services to the other in its own area. Certain technical capabilities of the network are dependent on the infrastructure roll-out of the operator managing that part of the network. The NSAs cover the whole of Czechia with the exception of Prague and Brno.

More specifically:

• The Commission had concerns that as opposed to West Czechia where T-Mobile CZ had deployed 4G/LTE in the 2100 MHz spectrum band, T-Mobile had been unable to do so in Eastern Czechia, to the detriment of subscribers in terms of download and upload speed for instance, due to infrastructure limitations.
• The Commission was also concerned that the way unilateral deployments and upgrades were charged by one party to the other in the respective regions included additional charges and therefore reduced the operators’ incentives to invest in the part of the country where they are not in charge of the network.
• Moreover, the Commission considered that the scope of the information exchanged between the parties in the context of the network sharing, including any information spill over between T-Mobile and O2 via CETIN, went beyond what was strictly necessary and included information that reduced the companies’ incentives to compete.

The Commitments

To address the Commission concerns, T-Mobile CZ, CETIN and O2 CZ, as well as their respective parent companies Deutsche Telekom and PPF Group, offered certain commitments.

Between 1 October and 1 November 2021, the Commission market tested those commitments and consulted all interested third parties to verify whether they would remove its competition concerns. In light of the outcome of this market test, the parties amended the initially proposed commitments, offering further commitments regarding the geographic scope of the current NSAs.

The Commission considered that the final commitments will remove the obstacles it found to competition in the Czech telecommunications markets resulting from the NSAs and decided to make them legally binding on the parties. More specifically, the parties have committed:

• To modernise the mobile network equipment to enable more flexibility and independence for the two sharing parties in certain radio frequencies – the parties will have the ability to roll-out the LTE 2100 MHz band throughout Czechia and will be able to decide how, when and where to deploy 4G or 5G on the specific spectrum bands concerned by the commitments;
• To review and change the financial conditions for unilateral network deployments in order to remove financial disincentives for such unilateral deployments;
• To improve the contractual provisions limiting information exchange to the minimum necessary for the operation of the shared network;
• To implement measures to ensure that CETIN effectively prevents information spill-over between T-Mobile CZ and O2 CZ in the context of the MNSA; and
• To not extend the geographical scope of the existing network sharing to Prague and Brno for a period between 7 and 10 years, in order to ensure that each player continues to deploy its own 2G, 3G and 4G networks in full independence in these two large cities, to the benefit of consumers.

The final commitments with regard to the NSAs will remain in force until 28 October 2033. The commitments with regard to the MNSA remain in force until the expiration of the MNSA or the NSAs, whichever of those terms ends earlier. Under the supervision of the Commission, a trustee will be in charge of monitoring the implementation and compliance with the commitments.

Background

O2 CZ is a major telecoms operator in Czechia, with more than six million lines, both fixed and mobile, and ultimately owned by the PPF Group. T-Mobile CZ is a mobile communications subsidiary of the Deutsche Telekom group, operating in the Czechia since 1996. CETIN is a fixed and mobile telecommunications infrastructure provider, ultimately also owned by the PPF Group.

On 25 October 2016, the Commission opened an investigation over concerns that the NSAs between CETIN and T-Mobile CZ as well as the MNSA concluded between O2 CZ and CETIN may be contrary Article 101 of TFEU. On 7 August 2019, the Commission issued a Statement of Objections. On 27 August 2021, the Commission issued a preliminary assessment, setting out its remaining competition concerns.

Network sharing is a widespread practice and the Commission recognises the potential benefits from such agreements arising from cost reductions and/or quality improvements. However, in some circumstances network sharing agreements may have a negative impact on competition.

Article 101 TFEU and Article 53 of the European Economic Area Agreement prohibit agreements and concerted practices that may affect trade between Member States and prevent or restrict competition.

Article 9 of the Antitrust Regulation 1/2003 allows the Commission to conclude antitrust proceedings by accepting commitments offered by a company. Such a decision does not reach a conclusion on whether EU antitrust rules have been infringed but legally binds the company to respect the commitments. A policy brief on commitment decisions under Article 9 is available here.

If the investigated companies were to breach the commitments, the Commission could impose a fine of up to 10% of their respective total annual turnover, without having to find an infringement of EU competition rules.

The full text of today’s Article 9 Commission Decision, the commitments and more information on the investigation will be available on the Commission’s competition website in in the public case register under the case number 40305.