Brussels, 29 May 2013
Mergers: Commission clears Syniverse's acquisition of MACH, subject to conditions
Following an in-depth review, the European Commission has approved under the EU Merger Regulation the proposed acquisition of Mach of Luxembourg by Syniverse of the US. The approval is conditional upon the divestiture of Mach's Data Clearing ("DC") services and Near Trade Roaming Data Exchange ("NRTRDE") services in the European Economic Area (EEA). These two types of services are technical steps of the roaming process enabling people to use their mobile phones while travelling abroad. Syniverse and Mach are the two largest providers of these services in the EEA and globally. After a preliminary investigation, the Commission had concerns that the transaction, as initially notified, would have allowed Syniverse to raise prices or to decrease the quality of these services. Indeed, the proposed merger would combine the first and the second largest supplier, creating a dominant player with virtual monopoly market shares. The commitments offered by Syniverse to divest a significant part of Mach's assets - in particular the entirety of Mach’s DC and NRTRDE businesses in the EEA - adequately address these concerns.
"European consumers increasingly use their mobile phones abroad for voice and data. The proposed commitments will ensure that the merger does not hamper the smooth functioning of wholesale roaming services through an increase in price or a decrease in quality" said Commission Vice-President in charge of competition policy Joaquín Almunia.
The investigation revealed that there are significant barriers to expansion in these markets and that the remaining smaller competitors would neither be in a position to act as credible providers to large customers nor to replace effectively the competitive constraint that Mach exerts on Syniverse today. Furthermore, the Commission found that customers have no significant buyer power to countervail the negative impact of the proposed concentration. The investigation also indicated that the entry of new competitors is unlikely. Thus, the proposed concentration would have risked increasing prices of DC and NRTRDE services and decreasing the quality of these services to such an extent that it could have led to inaccurate bills for end customers of roaming services.
To remove the Commission's concerns, Syniverse committed to divest a significant part of Mach's assets and in particular the entirety of Mach’s DC and NRTRDE businesses in the EEA. The divestment includes infrastructure which will allow the purchaser to provide not only DC and NRTRDE services but also a comprehensive set of other roaming-related services as required by customers.
The Commission's investigation revealed that a proven reputation and a successful track record with large MNOs are crucial for a competitor to credibly bid for the largest customers. Therefore, Syniverse committed to divest, alongside operational assets and propriety software for DC and NRTRDE operations, the former Mach personnel dedicated to these services in the EEA and to include former Mach top customers. The commitments also include a range of customer contracts with mid-sized and smaller MNOs in the divestment package in order to create a sustainable business.
The Commission will make sure that these assets are sold to a suitable purchaser who fulfils a number of criteria ensuring that it is a credible and viable competitor to the merged entity and that it will develop the divested activities at EEA and global level.
In the light of these commitments, the Commission concluded that competition on the DC and NRTRDE markets in the EEA will be adequately preserved.
In 2007, the Commission already examined the roaming data clearing sector, when it looked at the merger between Syniverse and BSG, at that time the third largest Data Clearing House ("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).
Syniverse notified its proposed acquisition of Mach to the Commission in November 2012. The Commission opened an in-depth investigation in December (see IP/12/1439). The transaction does not include the Evenex companies consisting of Evenex ApS and its wholly-owned subsidiary Evenex AS.
In March 2013, the parties were advised in a statement of objections that the merger raised competition concerns as regards DC and NRTRDE services for roaming. The Commission's investigation concluded indeed that the proposed transaction would not significantly affect the markets for Financial Clearing, SMS and other roaming-related services, because in those markets competitors are stronger, entry is easier and in-house provision a real alternative.
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 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 controlled by Warburg Pincus, a private equity firm.
Merger 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).
Currently, there are two other on-going phase II merger investigations. The first one examines the proposed acquisition of Olympic Air by Aegean Airlines (see IP/13/361), with a provisional deadline on 3 September 2013. The second ongoing phase II investigation was opened in March into the proposed acquisition of Shell's Harburg refinery assets by Nynas of Sweden (see IP/13/290). The deadline here is 6 September 2013.