Press Release 03/2023

05 April 2023

The Portuguese Competition Authority (AdC) has decided to open an in-depth investigation into the merger involving the acquisition by Vodafone Portugal, S.A. (Vodafone) of sole control over Cabonitel, S.A., whose only relevant asset for the present purposes is Nowo Communications, S.A. (Nowo).

The AdC decided to initiate this in-depth investigation as it considers that, in view of the evidence gathered so far, it cannot be excluded that this merger will result in significant impediments to effective competition in the domestic market or in a substantial part of it.

Companies involved, Market and Assessment

Vodafone is a multi-service electronic communications operator active in Portugal, where it provides fixed and mobile communications, fixed and mobile Internet services, pay-TV services and telecommunications packages.
Vodafone has national network coverage and provides services using its own or third-party infrastructures.
Nowo is a company that offers electronic communications services in mainland Portugal, including (i) fixed voice, (ii) mobile telecommunications (as an "MVNO", where it uses Altice's network), (iii) broadband internet access to residential customers, (iv) pay-TV services and (v) telecommunications packages to residential customers. Contrary to Vodafone, Nowo's network coverage is limited to certain regions of mainland Portugal. Nowo has recently obtained, through the 5G auction, radioelectric spectrum that will allow it to develop its own mobile telecommunications network.

As a result of the investigation carried out to date, the AdC considers that the merger is likely to generate a set of unilateral effects and coordinated effects, with adverse impacts for telecommunications customers in Portugal.

As regards unilateral effects, the AdC considers, at this stage, that the merger

• results in the acquisition of the operator that currently presents offers with comparatively lower prices in a significant set of fixed and mobile telecommunications services (affectation of current competition);
• not only results in the elimination of an operator which, despite its size, exerts a not insignificant competitive constraint in the market, but which is expected to be reinforced in the future as a result of the spectrum acquired at the 2021 5G Auction (potential competitive constraint);
• is likely to reinforce barriers to entry and expansion in the market, since Vodafone will "inherit" control over spectrum reserved for new entrants, such as Nowo, thus eliminating the possibility of its use by operators other than those already present in the market.

As coordinated effects, AdC considered, at this stage

• that the necessary conditions for an increase in the probability, sustainability and degree of coordination of behaviors by MEO, NOS and Vodafone are met, resulting in the potential alignment of offers of these operators with adverse impacts for telecommunications customers in Portugal.
• that market characteristics create a favorable context for the verification of the aforementioned conditions for coordination.
• that the elimination of Nowo, as an independent operator, has a potential impact or, at the very least, strengthens the conditions for the external sustainability of coordination between MEO, NOS and Vodafone.

The Decision

By its very nature, this decision does not constitute a final decision in the proceedings. The AdC decides to open an in-depth investigation into the merger when it deems additional diligence necessary. Pursuant to the Competition Law, after the in-depth investigation, the AdC may decide:

• Not to oppose the deal if it concludes that the merger, as notified or following changes made by Vodafone in the meantime (i.e., the so-called commitments or remedies), is not likely to create significant impediments to competition in the market concerned; or
• Prohibit the deal, if it concludes that the concentration is likely to significantly impede competition in the market, to the detriment of intermediate and/or end users, who constitute the demand in this market.