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EC fines Slovak Telekom and Deutsche Telekom

THE EUROPEAN Commission fined Slovak Telekom (ST) and its parent company Deutsche Telekom AG €38.84 million for abusing its dominant position in the market with broadband services in Slovakia for more than five years. The aim, according to the EC, was to push ST rivals out of the market.

THE EUROPEAN Commission fined Slovak Telekom (ST) and its parent company Deutsche Telekom AG €38.84 million for abusing its dominant position in the market with broadband services in Slovakia for more than five years. The aim, according to the EC, was to push ST rivals out of the market.

The EC concluded that ST refused to supply unbundled access to its local loops to competitors, and imposed a margin squeeze on alternative operators.

“Deutsche Telekom as parent company with decisive influence is also responsible for the conduct of its subsidiary; it is therefore jointly and severally liable for Slovak Telekom’s fine,” reads the official press release.

In addition, Deutsche Telekom received an additional fine of €31.1 million to “ensure sufficient deterrence as well as to sanction its repeated abusive behaviour [recidivism] as it had already been fined in 2003 for a margin squeeze in broadband markets in Germany”, the press release reads.

This means that the total fine for Deutsche Telekom is €69.91 million, the SITA newswire reported.

“Slovak Telekom’s strategy has distorted competition in the broadband market in Slovakia during more than five years, to the detriment of competition and consumers,” said EC Vice-President Joaquín Almunia, who is in charge of competition policy, as quoted in the press release. “Slovak Telekom did not only refuse to give access to its unbundled local loops under fair conditions. It also pursued a margin squeeze policy which made it impossible for alternative operators to use its legacy telephone network infrastructure without incurring a loss. As the parent company with decisive influence on its subsidiary Deutsche Telekom has also been held responsible for the abusive conduct.”

The Telecommunication Office (TÚ) ordered ST to allow unbundled access to its local loops within its original telephone network in June 2005. In August 2005 it published conditions under which it would allow alternative operators to access its unbundled local loops

“These conditions were such as to render the access unacceptable,” the EC press release reads. “In particular, Slovak Telekom unjustifiably withheld network information necessary for the unbundling of the local loops, unilaterally reduced the scope of its regulatory obligation to unbundle and set other unfair terms and conditions in relation to each of the steps needed to obtain access (e.g. collocation, qualification, forecasting, repairs and bank guarantees). This delayed or prevented the entry of alternative operators into the retail broadband services market in Slovakia and amounts to a refusal to grant access.”

Moreover, ST set the prices for access to its local loops and its retail prices at levels which would force competitors to incur losses if they wanted to sell broadband services to retail customers at retail prices matching those offered by ST (a so-called “margin squeeze”). Under such conditions alternative operators could not viably enter the Slovak market. Where alternative operators decided to roll out their own networks, market entry only occurred in geographically limited areas and was also delayed, according to the press release.

Both types of behaviour constitute abuses of ST’s dominant position, prohibited by Article 102 of the Treaty on the Functioning of the European Union (TFEU), the EC explained.

“We still have not received the decision, so we cannot comment on it in details at the moment,” ST spokesman for corporate affairs Martin Vidan told SITA. “However, based on the information we received from the EC during the proceeding, we can assure our customers that the recent EC decision will not have negative impact on quality or price of provided services.”

Source: EC press release, SITA

Compiled by Radka Minarechová from press reports

The Slovak Spectator cannot vouch for the accuracy of the information presented in its Flash News postings.

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