French merger threatens pay TV market, EU says

The European Commission has opened an in-depth investigation into the proposed acquisition of TV and phone company Télé2 France's fixed telephone and Internet access activities by SFR France, it said Tuesday.

SFR France, which is jointly owned by British mobile phone operator Vodafone Group and French telecoms and media conglomerate Vivendi Universal SA, may corner the market for pay-TV in France as a result of the deal, the Commission said.

High-speed Internet service providers could be the worst affected because they are the main source of competition in the pay-TV sector, the regulator added.

To continue reading, register here and become an Insider. You'll get free access to premium content from CIO, Computerworld, CSO, InfoWorld, and Network World. See more Insider content or sign in.

The European Commission has opened an in-depth investigation into the proposed acquisition of TV and phone company Télé2 France's fixed telephone and Internet access activities by SFR France, it said Tuesday.

SFR France, which is jointly owned by British mobile phone operator Vodafone Group and French telecoms and media conglomerate Vivendi Universal SA, may corner the market for pay-TV in France as a result of the deal, the Commission said.

High-speed Internet service providers could be the worst affected because they are the main source of competition in the pay-TV sector, the regulator added.

"In view of the very strong position held by Vivendi through its subsidiary group Canal+ in the pay-TV sector in France, the Commission considers at this stage in the procedure that the proposed takeover is likely to give rise to competition concerns both horizontally, on the downstream market for the retail distribution of pay TV, and vertically, on the upstream markets for the acquisition of distribution rights for pay TV and audiovisual content," the Commission said.

A preliminary examination of the deal suggested that "the proposed takeover could weaken ADSL operators, who are the main source of competition in the pay-TV sector in France and could therefore lead in due course to an increase in prices and a deterioration in the quality of supply," the regulator said.

The extended probe will examine in detail the potential anti-competitive effects on pay-TV markets in France and ensure that the interests of consumers would not be adversely affected.

The Commission has until Aug. 2 to decide whether the takeover would significantly impede effective competition.

Télé 2 France, a subsidiary of Télé 2 Europe, is active in France in the fixed and mobile telephony sector, the provision of Internet access, and pay-TV distribution via ADSL. Télé2 France's mobile telephony activities are not affected by the proposed takeover.

During the first stage of the investigation, SFR and Vivendi submitted an initial set of undertakings aimed at removing the competitive concerns identified by the Commission. However, the Commission found them "unsatisfactory and insufficient" as they failed to eliminate the risk of undermining ADSL operators, the Commission said.

SFR and Vivendi then submitted further commitments which, because they arrived late, could not be subjected to a market investigation. Consequently, the Commission has not been able to assess whether these further commitments would eliminate the competition problems it had identified.

More information on the case will be available on the European Commission's Web site.

The IDG News Service is a Network World affiliate.