BRUSSELS--The European Commission's antitrust unit is fining
Deutsche Telekom AG and its subsidiary Slovak Telekom A.S. a total
of EUR69.9 million ($88.4 million) for shutting out rivals from the
Slovak market for broadband services for more than five years, in
breach of EU antitrust rules, the commission said in a statement
Wednesday.
The total consists of two fines: one of EUR38.8 million on
Slovak Telekom A.S. and its parent company, Deutsche Telekom AG for
refusing to give access to the so-called local loop or "last mile,"
the final section of the network which joins telecoms cables to
subscribers' homes, and an additional EUR31 million fine for
Deutsche Telekom alone because it is a repeat offense after similar
tactics in 2003 in Germany.
"Slovak Telekom's strategy has distorted competition in the
broadband market in Slovakia during more than five years, to the
detriment of competition and consumer," Commission Vice-President
Joaquín Almunia, in charge of competition policy, said. "It also
pursued a margin squeeze policy which made it impossible for
alternative operators to use its legacy telephone network
infrastructure without incurring a loss."
Slovak Telekom, the incumbent telecom operator in Slovakia,
offers, among other things, fixed broadband services over its
legacy metallic telephone networks and over fiber networks.
According to the commission, back in 2005, Slovak Telekom set
the conditions under which alternative operators could access the
local loop--which made it unfeasible. Moreover, Slovak Telecom set
prices at such levels that, in order to compete, its rivals would
be forced to incur losses.
"Such a practice is abusive, it delayed market entry," an EU
spokesman said.
Known as a "margin squeeze," the practice of pricing wholesale
broadband access in such a way that rivals would make a loss if
they sold their retail service at the same price as the biggest
operator has long been on the commission's radar. In 2003 the
commission fined Deutsche Telekom EUR12.6 million for doing it, and
in 2007, the Spanish incumbent Telefónica S.A. was hot with a
EUR151 million fine.
Deutsche Telekom is a majority shareholder of Slovak Telekom,
holding 51% of its shares, and can nominate the majority of the
Board of Directors. The Commission said its investigation "revealed
that Deutsche Telekom did indeed exercise decisive influence
notably through overlaps in senior management personnel," and is
therefore jointly liable for the main fine.
The former state-owned German telecoms giant said it would
appeal the commission's decision--and took a swipe at the way Mr.
Almunia has operated during his tenure as the 28-nation bloc's
antitrust chief, calling the decision "politically motivated."
"It is difficult to even see why extensive resources of the
directorate-general were devoted to a case of this nature in the
first place," spokesman Andreas Middel said in an email. "This is
completely disproportionate to the amount of effort given to other
commission proceedings... Specifically, Commissioner Almunia has
devoted the same or even more resources to this case than to the
Google case that is running in parallel and being dealt with by the
same directorate-general of the European Commission."
Last month Mr. Almunia said Google Inc. must improve its
proposal to settle European Union concerns over its search
practices or face formal antitrust charges; his agency's handling
of its investigation of Google has yet to yield results after
almost four years and three attempted settlements.
Write to Frances Robinson at frances.robinson@wsj.com
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