Mergers: Commission opens in-depth investigation into proposed acquisition of Mach by Syniverse

Brussels, 21-12-2012 — /europawire.eu/ — The European Commission has opened an in-depth investigation under the EU Merger Regulation into the proposed acquisition of Mach of Luxembourg by Syniverse of the US. Roaming is the sending and receiving of calls, SMS and data while travelling abroad. The parties are data clearing houses (DCHs) that settle the usage records of subscribers that roam on mobile operators’ networks. Mobile operators use these services to determine the wholesale payments they make to each other for the roaming of these subscribers. These payments are ultimately incorporated in consumers’ phone bills. The Commission’s initial investigation indicated that the merger may raise competition concerns on various roaming technology markets. The Commission now has 90 working days, until 15 May 2013, to take a final decision on whether the proposed merger would significantly impede effective competition in the European Economic Area (EEA). The opening of an in-depth enquiry does not prejudge the outcome of the investigation.

Commission Vice President in charge of competition policy Joaquín Almunia said: “The possibility for consumers to roam at reasonable cost when travelling to other Member States is a major achievement of the internal market. We must ensure that mergers involving the key technologies that allow consumers to use this possibility do not jeopardise this achievement.”

The Commission’s initial investigation showed that the merger would create the largest DCH by a very wide margin at both the EEA level and worldwide. At this stage, there are doubts that customers and remaining competitors could sufficiently constrain the merged entity after the merger. Should mobile operators not have sufficient alternatives to the merged entity, they would become more vulnerable to price increases and decreases in the quality of the merged entity’s data clearing services. This would cause considerable harm to these operators.

Moreover, the merged entity’s market power in the settlement of invoices that mobile operators send to each other for the roaming of their subscribers (“financial clearing”) would be significant. Finally, the merged entity would control important data feeds that mobile operators use to detect roaming fraud. Limiting this type of fraud is a key issue for mobile network operators. At this stage, there are doubts that the parties’ competitors for these services could represent a credible alternative for mobile operators. If these doubts are confirmed, the merger could also cause a price increase and a reduction of the quality for these services.

The Commission will now investigate the proposed merger in-depth to determine whether these initial concerns are confirmed or not.

The merger was notified to the Commission on 16 November 2012.

Background

The Commission has already dealt with the roaming data clearing sector in 2007, when it looked at the merger between Syniverse and BSG, at that time the third largest DCH in Europe. The Commission was able to clear this merger because Mach remained on the market as a strong competitor to the merged entity (see IP/07/1852). Now Syniverse proposes to acquire Mach. Post-merger, it would be the largest DCH by a very wide margin at both the worldwide and EEA-levels.

Companies and products

Syniverse is a global provider of technology services to telecommunications companies. Its main services include data clearing and financial settlement for roaming, SMS and number portability and various other technology solutions for telecommunications companies. Syniverse is based in Tampa (US) and controlled by the Carlyle investment group.

Mach is also a global provider of technology services to telecommunications companies. Its main services include data clearing and financial settlement for roaming, SMS solutions, fraud management and revenue protection services, business intelligence and content billing solutions. Mach is based in Luxembourg and currently controlled by Warburg Pincus, a private equity firm.

Merger control rules and procedures

The Commission has the duty to assess mergers and acquisitions involving companies with a turnover above certain thresholds (see Article 1 of the 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).

There are currently three other on-going phase II investigations. The first one examines the planned acquisition of TNT Express by UPS in the small package delivery sector (see IP/12/816). The Commission has until 5 February to reach a final decision. The second phase II investigation concerns Ryanair’s project to merge with rival Aer Lingus (see IP/12/921).The deadline here is 27 February 2013. Finally, in the third on-going phase II, the Commission investigates the proposed combination of Munksjö and the European label and processing business of Ahlstrom, in the paper industry (see IP/12/1338), with a deadline on 16 May 2013.

More information on the case will be available at:

http://ec.europa.eu/competition/elojade/isef/case_details.cfm?proc_code=2_M_6690