Vivacom buys Telnet and Networx following Bulgarian antitrust saga

01 September 2023 4 min. read

Bulgarian mobile and broadband services provider Vivacom has completed the acquisitions of Telnet and Networx, after receiving green light from the Bulgarian competition authority following an extensive antitrust review triggered by competitors A1 and Yettel.

The closing of the deals caps a long saga of antitrust rivalry among the three large telecommunications operators in Bulgaria.

Both deals were originally announced in 2021 but were suspended by the Supreme Administrative Court (SAC) in late 2022 following mounting criticism from A1 and Yettel, as well as their respective parent groups, A1 Telekom and PPF.

Vivacom buys Telnet and Networx following Bulgarian antitrust saga

Initially, rivals A1 and Yettel just voiced their concerns about the impact of the deals on market concentration in Bulgaria’s telecom industry. But after Vivacom closed a number of other deals between 2021 and late 2022, including TV providers Net 1 and ComNet Sofia, as well as Plovdiv-based N3, and Vivacom became part of a larger group itself (United Group), the concerns shifted into fiercer allegations.

Vivacom is the incumbent fixed network operator in Bulgaria supplying fixed telephony and broadband, pay TV and mobile services nationally.

Telnet is a local fixed telecoms operator active primarily in Veliko Tarnovo, while Networx is a regional fixed telecoms player active in Northern Bulgaria, primarily in Ruse.

Meanwhile A1 and Yettel entered into another related conflict with Vivacom. Late 2022, local Bulgarian businessman Spas Rusev acquired Bulsatcom, but with funds from Vivacom’s owner, United Group. A1 and Yettel believed that the indirect acquisition of Bulsatcom’s infrastructure would give Vivacom a dominant position in the TV distribution market and a (too) large position in the internet market.

The verdict

Bulgaria’s antitrust authority, the Commission on Protection of Competition (CPC), studied both cases, and found that the issues raised by A1 and Yettel were ungrounded. The antitrust body noted that the planned deals would give the new united group “neither the ability, nor the stimulus to curb effective competition.”

Advising Vivacom during its antitrust process was NERA Economic Consulting, with a team led by Directors Adrien Cervera-Jackson and Gabriella Monahova, supported through the process by counsel Kambourov & Partners.

NERA Economic Consulting submitted two expert reports to the CPC explaining that the transactions (separately or taken together) were unlikely to raise horizontal or vertical competition concerns. The analysis focused on assessing potential horizontal unilateral effects in the supply of retail fixed broadband, wholesale and retail provision of dedicated capacity, and retail supply of pay TV services at a national level and in the regions affected by the transactions.

The analysis also dismissed potential vertical input foreclosure concerns in relation to the wholesale supply of pay TV channels to retailers.

Deals closed

Both deals have now closed by Vivacom, with the integration phase now kicked off.

Following the verdict, Vivacom’s parent United Group released a statement rejecting the allegations made by its competitors, calling them “irresponsible, inaccurate and misleading.”

“The Bulgarian fixed broadband and pay TV market is a healthy multi-player environment, with three national operators and hundreds of regional and local market players. Vivacom currently holds 31% of the fixed broadband market and 33% of the pay TV market in Bulgaria (based on the number of subscribers).”

“The fixed broadband market share of A1 and regional and local market players is 28% and 35% respectively, and Vivacom continues to face strong competition in relevant regional markets including northern Bulgaria.”

“By comparison, elsewhere in Southeast Europe, Deutsche Telekom holds over 60% of the fixed broadband and pay TV market in Croatia and over 50% in Greece (via its controlling stakes in local incumbents).”

“The regulator reviewed Vivacom’s cases with an exceptional level of scrutiny, conducting a forensic analysis of the facts, resulting in a comprehensive 104-page decision. The level of detail in the enquiry is unprecedented in Bulgarian competition matters and more than meets best practice for countries in the European Union.”

“Vivacom has actively cooperated with the review and has responded to over a dozen questionnaires sent by the CPC. It has also submitted detailed reports on both transactions, prepared by NERA Economic Consulting, a leading international expert in merger control.”