Brussels, 30 May 2024
The European Commission has approved unconditionally, under the EU Merger Regulation, the acquisition by KKR & Co. Inc. (‘KKR‘) of NetCo. The Commission concluded that the transaction would raise no competition concerns in the European Economic Area (‘EEA’).
Today’s decision concerns the acquisition by KKR of NetCo, which comprises the primary and backbone fixed-line network business of Telecom Italia S.p.A. (‘TIM’) as well as FiberCop S.p.A (‘FiberCop’). FiberCop is a joint venture between TIM and KKR comprising TIM’s secondary fixed-line network.
The Commission’s investigation
The Commission investigated the impact of the transaction on the market for wholesale broadband access services in Italy and concluded that it would not significantly reduce the level of competition. In particular, the Commission found that:
- KKR would not have the ability to restrict access to passive services (i.e., infrastructure). For each wholesale product the number of available networks and wholesale providers will stay the same and the market power of NetCo will not materially increase as compared to TIM or FiberCop today. The existing long-term agreements with several access seekers, including Fastweb and Iliad, which have been entered into after the creation of FiberCop in 2021, ensure that KKR will not be able to deteriorate the conditions for wholesale access or terminate such access.
- The transaction would not increase the likelihood of coordination between NetCo and OpenFiber, given that Fastweb will continue to exert competitive pressure on NetCo and its long-standing competitor, Open Fiber. In addition, NetCo and Open Fiber will likely continue to compete, both to attract new customers and to roll-out fibre network, either in new areas or in each other’s areas.
KKR and TIM also agreed on a master services agreement (‘MSA’) that will govern the relationship between NetCo and TIM post-transaction. The Commission found that the MSA is not an integral part of the transaction, as it is not an agreement through which KKR acquires control over NetCo. Although the MSA does not fall under the scope of EU Merger Regulation, it remains however reviewable under EU or Italian antitrust rules as well as subject to regulatory oversight.
The Commission therefore concluded that the proposed merger would not raise competition concerns on the market for wholesale broadband access services in Italy and cleared the transaction unconditionally.
Companies and products
KKR, based in the US, is a global investment firm that offers alternative asset management as well as capital markets and insurance solutions.
NetCo, based in Italy, is a newly founded company comprised of FiberCop, which is currently jointly controlled by KKR and TIM, as well as TIM’s primary and backbone fixed-line network. FiberCop, based in Italy, provides passive-only services on TIM’s secondary network and upgrades TIM’s secondary assets from copper to fibre in Italy. Post-transaction, NetCo will provide, among others, wholesale fixed access services on both its copper and fibre networks in Italy.
Primary fixed-line networks connect the service provider central office to the street cabinet. Secondary fixed-line networks connect the street cabinet to the user premises. Backbone/backhaul fixed-line networks connect different regions and data centres with each other and to the internet.
Merger control rules and procedures
The transaction was notified to the Commission on 19 April 2024.
The Commission has the duty to assess mergers and acquisitions involving companies with a turnover above certain thresholds (see Article 1 of the EU Merger Regulation) and to prevent concentrations that would significantly impede effective competition in the EEA or any substantial part of it.
The vast majority of notified mergers do not pose competition problems and are cleared after a routine review. From the moment a transaction is notified, the Commission generally has a total of 25 working days to decide whether to grant approval (Phase I) or to start an in-depth investigation (Phase II).
More information will be available on the Commission’s competition website, in the public case register under the case number M.11386.
Source – EU Commission