Monthly Archives: April 2010

Mazák: Margin squeeze constitutes abuse of dominant position

According to Advocate-General Jan Mazák, Deutsche Telekom (DT) was guilty of abuse of dominant position on the German telecommunications market from 1998 to May 2003 by practicing a ‘margin squeeze’ policy. The advocate-general gave his opinion, on 22 April, on the operator’s appeal against a Court of First Instance ruling (1).

There is a risk of margin squeeze when two companies (A and B) compete on a retail market and B depends on A on an intermediary market. There is margin squeeze when operator A’s retail prices are lower than the sum of the wholesale prices for the intermediary resource plus operator B’s costs.

This is the court’s first case concerning abuse of dominant position brought about by a margin squeeze. What is at issue here is the practice of charging competitors prices for access to the analogue or digital network – ‘intermediary services’ – higher than the retail prices charged to DT’s own end-users. This price-setting based on a margin squeeze obliged its competitors to charge their subscribers higher prices than those DT charged to its own users. Some 15 DT competitors took action that led to a European Commission ruling, on 23 May 2003, against the German telecoms leader for abuse of dominant position and a fine of €12.6 million. The German firm requested the Court of First Instance (now the EU General Court) to set aside the Commission’s decision or reduce the fine, but the court rejected DT’s pleas and upheld the fine. DT then brought an action before the Court of Justice, but limited its case to points of law.


The advocate-general, who proposes a solution to the court, defends the position of the Commission, the Court of First Instance and Vodafone, a party to the proceedings. He proposes that the court should dismiss the appeal and maintain the fine against DT. Mazák finds that all of DT’s arguments, which are basically identical to those presented to the Court of First Instance, are inadmissible.

First he notes that while respecting the price ceiling imposed by the regulatory authority (RegTP), Deutsche Telekom had sufficient discretion, from the start of 1998 to the end of 2001, and from 2002 to May 2003, to eliminate or reduce the margin squeeze. Despite what the operator claimed, it was not bound by price approval by RegTP, even if the regulator denied the existence of anti-competitive effects. RegTP applies telecommunications law and is not the guarantor of competition rules, argues the advocate-general. Only the Commission is competent to judge whether competition law has been infringed. As a dominant undertaking, DT should have spontaneously checked whether its practices were anti-competitive. Case law is sufficiently clear to prompt it to evaluate and lower its prices for its own users in order to eliminate the distortion.

The advocate-general also rejects DT’s argument that the Court of First Instance did not state the reasons for which it concluded that the appellant had acted intentionally because it was aware of the factual elements relevant for the assessment of its case, which it denies. He also rejects the claim that the court failed to give reasons in its assessment of the margin squeeze justifying the finding of abuse. He maintains that neither the Commission nor the Court of First Instance had to demonstrate the real effects of abusive practices, but in conformity with the court’s case law, they simply had to highlight the potential dangers of such practices. Since DT controlled the only gateway to the German market for competitors, they were totally dependent on its practices and the margin squeeze between prices for intermediary services and the dominant operator’s retail prices de facto hampered the development of competition. A potential competitor as efficient as DT would inevitably incur losses on the market of retail services to end-users. The low market shares held by DT’s competitors attest to such barriers. The advocate-general also finds that the Commission rightfully based its analysis of the abusive nature of the price-setting practices solely on DT’s prices and costs, without taking into account the specific position of competitors. What must be assessed is the infringement caused by the dominant operator, which had to be reckoned with at the time of the facts because there was no other infrastructure apart from Deutsche Telekom’s fixed networks that could have enabled its competitors to enter the retail market on a viable footing.

Case law

The only settled case relating to a margin squeeze is that of IPS (Industrie des poudres sphériques) v Commission (T-5/97), but it differs in that it concerned the Commission’s rejection of a complaint for abuse of dominant position by one of the applicant’s competitors, particularly through a margin squeeze based on an anti-dumping procedure. Another case is pending (TeliaSonera Sverige C 52/09), but it involves a different regulatory context and different stakes.

Latvian govt says Lattelecom not up for sale

The Latvia government is not planning to sell its remaining stake in Lattelecom, the Latvian minister for communications Kaspars Gerhards told Dienas Bizness.

The state owns 51 percent in Lattelecom, and the remaining 49 percent is held by TeliaSonera. The minister said that the state is in negotiations with TeliaSonera, but these are about running the company, rather than any share sale. The minister said the important question was not who owned the copany, but professional management. Lattelecom has shown promising developments in diversifying its activities and increasing its value, such as through the launch of digital terrestrial TV.

If the state did receive an offer for its stake, it would consider the merits of the offer and the impact on the local telecoms market, he added.

TeliaSonera also owns 49 percent of mobile operator LMT, while the majority stake is, directly and indirectly, state-owned.

Structural Separation and National Security

Last week I had a fascinating (though short) discussion with one of my tech friends in Sweden. The discussion moved on to structural separation. He said to me that back in the days when France Telecom was looking to buy Telia Sonera, a discussion arose in political circles about the consequences of the national telecom network not being owned by national money. It was concluded back then that because of who France Telecom was, it wasn’t such a big deal, and in any case FT ended up not buying Telia Sonera.

He explained though that the line of thought didn’t die there and then. What if, he surmised, the acquirer was not French but Chinese ? Would the Swedish government be happy with a network owned by foreign assets perceived to be ‘not so friendly’ and ‘not so private’ entering every one of their defense facilities ?

It’s not a trivial question, and strangely enough, not one that I had ever thought about. This, my friend suggested, has changed the nature of the regulatory debate on separation from a business and economic development argument to a national security argument. And this is, of course, not just about Sweden, far from it. While it looks unlikely that Telecom giants like DT, FT, Telefonica or BT be taken over by Chinese or Russian companies in the near future, it’s not such an improbable perspective for TI, Telia Sonera, TDC, maybe even KPN. It’s got nothing to do with their health and all to do with their size.

What happens in that case? Do countries run the risk of going head on against WTO and protect their “national assets”? Or do they start thinking pre-emptively and structurally seperate the actual physical asset to ensure that even if the service incumbent is taken over, their national security is no longer at risk, it’s just a matter of finding another service provider?

While I was in Italy (where the perspective of TI falling into the hands of Telefonica is very real) another response scenario was suggested to me: the national network falls into the hands of a foreign company (not necessarily hostile in this case), the government invests in a separate national fiber network. Could work, but very expensive if you can’t leverage the copper network assets.

Why not separate in the first place ?

Uzbek Communications and Informatization Agency warns Coscom

The Uzbek Communications and Informatization Agency held meeting with the heads of LLC “Coscom”, Ltd. “Nokia Siemens Networks Tashkent” and “ZTE Investment”, the agency reported.

The meeting focused on the violations revealed in the licensed activity of Coscom. The state inspectorate of communication reported that Coscom and its subcontractors, such as LLC “Nokia Siemens Networks Tashkent”, LLC “ZTE Investment”, LLC “Iris Telekom Toshkent”, LLC “Bartes Engineering” and Ltd. “Osiyo Turon Telekom”, are not taking the necessary steps to comply with the mobile communications network design and construction, disregarding regulations and requirements authorized by the supervisory authority. In addition, the companies are making repeated offenses, the agency reported.

The agency issued an order asking the companies to remove the violations by certain time set by the agency. The report stressed that the agency will consider suspending their license or other appropriate measures under the current legislation, if no actions are taken.

The agency did not specify the details about the violations.

The operator has previously been fined for its activities. In February 2007, the agency decided to suspend the company’s license for 10 days in connection with a periodic stoppage of technical equipment. After resolving the deficiencies, the operator resumed work.

Coscom has a GSM cellular services license in Uzbekistan, and is a leading national operator.

In July 2007, Fintur Holdings BV, which is controlled by the Swedish-Finnish TeliaSonera operator, acquired 100 percent of the assets of the U.S. MCT Corp, which owned stakes in Coscom. TeliaSonera owns 96 percent of the share, while the Uzbek Takilat owns six percent. In February 2009, the company launched commercial 3G network services in Tashkent, Samarkand and Bukhara.

In 2009, the company’s subscriber base grew 1.9 times to 5.07 million users, or 32 percent of the country’s cellular market.

Five mobile operators operate in Uzbekistan.

The subscriber base of cellular communication in Uzbekistan grew by 29 percent to 15.793 million in 2009.


Bonuses Banned At Telia

Shareholders in the Swedish-Finnish telecom giant TeliaSonera voted against giving management bonus payouts Wednesday, thanks to pressure from the Swedish government, which held 52% of the votes at the AGM. [7 april kl 20.28]

Other companies where the Swedish state holds majority ownership, such as power generator Vattenfall, train company SJ and bookmakers Svenska Spel have already had management bonuses stopped.

Industry minister Mats Odell says he hopes the ban on bonuses at Telia will be implemented soon.

All other major owners of Telia shares, including the Finnish government and Swedish Pension Funds, voted in favour of rewarding productivity with cash payouts.

TeliaSonera in Georgian tax dispute

Swedish-Finnish telecom firm Telia Sonera has landed in a tax battle in Georgia after its Geocell subsidiary was served with a 450 million kronor ($63 million) penalty by local tax authorities.

But TeliaSonera has refused to pay and has appealed the decision via Geocell, business daily Dagens Industri reports.

“We expect the case to be decided in May 2010,” TeliaSonera said in a written comment to the newspaper.

The company also said that they expect the demand will drop significantly.

Geocell is Georgia’s leading mobile operator and is 74 percent owned by TeliaSonera. The company is a strong revenue earner for TeliaSonera with Geocell reporting income in 2009 of 1.4 billion kronor.

MagtiCom to Buy Geocell

TeliaSonera forced to cut wholesale fixed network charges

Sweden’s telecoms regulator Post & Telestyrelsen (PTS) yesterday ordered the country’s incumbent PSTN operator TeliaSonera to cut its prices for a range of wholesale fixed network services by between 1% and 10%, reports Dow Jones Newswires. The PTS said that the price regulation will improve competition in the market, but Nina Stridsberg, head of communications at TeliaSonera’s Swedish infrastructure unit Skanova, said the company plans to appeal the ruling, although it will comply with the regulator’s instructions initially.

TEO keičianti DSL į šviesolaidinį gudrauja

Kaip žinome, TEO keičia DSL technologiją į FTTH(plačiau žinomas šviesolaidinio pavadinimu). Taip pat, mažinamos kai kurių(gal ir visų, bet šito negarantuoju) planų kainos ~20LT. Tai yra du DIDELI PLIUSAI šiai bendrovei, kuri šiame puslapyje turi daug neigiamų atsiliepimų. Bet šiandien ne apie tai…

Taigi daugelis, pas ką nėra galimybės pasirinkti kitą interneto tiekėją, dėl vietovės ar kitų problemų, naudojasi TEO paslaugomis. Tame tarpe ir aš.

Labai apsidžiaugiau, kai įvedė šviesolaidinį. Pagaliau, galvojau, galėsiu atsisakyti to niekam nereikalingo telefono abonentinio mokesčio, už kurį kas mėnesį moku 19,01LT(pavadinimu mokėjimo planas “Bazinis”), be kurio atseit neveiks internetas, nors realiai man reikia tik telefono laido ir dar mano planas atpigs 20LT. Taigi, vietoj 120LT mokėsiu tik ~80LT. 40LT nėra labai didelė suma, bet ir nelabai maža.
Taigi užėjau į jų savitarnos svetainę ir jau norėjau susimokėti už paslaugas internetu, bet mane sustabdė sąskaitos dydis, kuris buvo ~100LT. Atsidarius ir pradėjus nagrinėti šio ir praėjusio mėnesių sąskaitas radau, kažkokį, naują planą “NERIBOTAS”, už kurį turėjau sumokėti 19,01LT(nemažas sutapimas, kadangi plano “Bazinis” jau nebebuvo sąskaitoje, nors laidinis telefonas dar veikia, o atsirado naujas planiukas, kurio kainą IDEINTIŠKA planui “Bazinis” centas į centą!).

Tolesnis žingsnis beliko skambinti jų aptarnavimo telefonu 1817, ką aš ir padariau. Atsiliepusios konsultantės paklausiau iš kur čia atsirado, tas planas “NERIBOTAS”, o atsakymas buvo paprastas: mes jums, kaip lojaliam jūsų klientui, įjungėme šitą planą nemokamai! Toliau sekė postringavimai, kad mokate tiek pat, o galite prakalbėti daugiau ir t.t., ir panašiai. Na turiu aš tą išklotinę… ir tikrai mokėsiu tiek pat(konsultantė tikrai nemeluoja), pats paskaičiavau, nes ant laidinio telefono per mėnesi net 2LT sugebu prakalbėti, o moku, tai 19. Ginčytis negaliu su geležine logika.. Iš karto kyla sekantis klausimas, o nuo kada TEO man gali įjungti kažkokias paslaugas be mano sutikimo(raštinio, ar žodinio per telefoną, pvz: TELE2 siulė kažkokią, metus nemokamą, paslaugą, kurią norint užsisakyti vistiek reikėjo vieną kartą nusiusti patvirtinančia žinutę, kurios kaina minimali), man iš anksto nepranešus(nesvarbu ar mokamos paslaugos, ar ne)? Gaunu atsakymą, kad praeitą mėnesį gavau jų kažkokį reklaminį bukletą, kuriame rašome apie naują planą “NERIBOTAS”, kuris bus įjungtas automatiškai, jei neatsisakysiu tos paslaugos iki sekančio apmokėjimo. Paklausus ar jie žino apie tokius dalykus, kaip debiatinis mokėjimas ar pvz laiško negavimas(juk neregistruotas ten, tai gal pasimetė pašte), galų gale juk nevisi žmonės permeta akimis, tą jų reklaminį šlamštą, vėl prasidėjo pasakos apie to plano privalumus.

Galiausiai konsultantė užsirašė mano telefoną ir pažadėjo, kad rytoj su manim susisieks vadybininkas. Pasitikrinau savitarnos svetainėje visus TEO pranešimus man ir šių metų sąskaitas… Deja, nieko apie jokio plano “NERIBOTAS” automatinį įjungimą niekur neradau.

Rytoj po pokalbio su vadybininku atsijungsiu laidinį telefoną(už tai, jei neklystu, reikės sumokėti 50LT, nors vėlgi, smarkiai nesidomėjau) ir galbūt pavyks atsijungti tą planą “NERIBOTAS”. Kadangi praėjusio mėnesio sąskaitą jau turiu, tai ilgai delst negalima, todėl jei pataisytos sąskaitos, be plano “NERIBOTAS”, per savaite neatsiųs į savitarnos svetainę, tai teks kreiptis į vartotojų teisęs, už tokias nesamones, gal pagelbės.

Taigi, mieli skaitytojai, patariu ir jums, pas ką įvedė šviesolaidinį, pasitikrinti sąskaitą,kurioje galbūt atsirado kažkoks mistinis ir neužsakytas planas, kurio kaina centas į centą identiška į dabar jau pradingusi planą “Bazinis”. Kas iš jūsų mokate debiatinę sąskaitą, tai ir mokėsit už planą “Bazinis”, tik jau kitu pavadinimu.. “NERIBOTAS”..

Teliasonera has been ordered to cut prices for wireline products

Today the Swedish Postal and Telecom Agency ordered TeliaSonera to lower their prices for several products and services in their fixed network. They decided that Teliasonera has to sell these products and services to regulated prices so that it can benefit customer choice in the market and other companies that can sell telephony and broadband services to better prices.

There is some huge concerns regarding the competition in the telephony and broadband department, so that’s why Postal and Telecom Agency has been focused to even the field in the market.

TeliaSonera has for quite sometime ruled the Swedish market with their high prices and they now have been ordered to lower the prices again to benefit the customer choices.

TeliaSonera management denied bonuses

The top management of the telecommunications company TeliaSonera has been denied the bonuses that had been proposed by the company’s Board of Directors.

At the company’s shareholders’ meeting on Wednesday, the view of the Swedish state prevailed. The Swedish state owns 37 per cent of TeliaSonera, and controlled nearly 52 per cent of the vote at the meeting.

Sweden’s government feels that managers of companies that are owned by the state should be paid only their basic salaries and pension benefits.

Representing Sweden at the meeting was State Secretary Urban Karlström, who said that the Swedish government will implement the same policy line in all companies in which it has a holding.

All of the 19 other large holders of TeliaSonera stock were in favour of granting the company’s management the bonuses that had been proposed.

The second-largest owner of TeliaSonera shares, the Finnish State, would have wanted to allow the payment of an annual bonus, and the participation in a three-year incentive programme.

Representing Finland at the meeting was Kari Järvinen, who also serves as the CEO of the state-owned holding company Solidium. He chided Sweden for not respecting the views of the other shareholders.

“It seems that this is mainly about domestic politics in Sweden. But now we need to live with this decision, and see to it that the new board gets the chance to do the right things. The bonus systems took far too much of the board’s time last year”, Järvinen said.

Already last year the Swedish state pushed through a decision to cancel the bonuses.

However, the decision was not fully implemented; CEO Lars Nyberg was paid a bonus of 3.2 million krona, or about EUR 330,000.
Tom von Weymarn, who gave up the post of Chairman of the Board of TeliaSonera on Wednesday, said at the meeting that it would have been too expensive to cancel the old bonus contracts.

Wednesday’s decision actually increases the company’s fixed expenditure by forcing TeliaSonera to raise the salaries of the top management in order to compensate for the fall in bonuses.

Järvinen notes that the management will now be paid more, but this time, the amount will not be dependent on the achievement of good results.

Under the model put forward by the board of directors, the managers would have been granted bonuses equivalent to a maximum of 90 per cent of their fixed salaries.