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Brussels, 20 June 2000

Commission clears Deutsche Telekom's first sale of a regional cable TV network in Germany

The European Commission has granted regulatory clearance under the Merger Control Regulation to the sale of Deutsche Telekom's (DT's) regional cable TV network in Nordrhein Westfalen to Callahan Invest Limited. The sale is expected to lead to more competition in communications services, as sought in the Commission's 1999 Cable Directive. In its assessment of the transaction, the Commission found that the operation will not create or strengthen a dominant position.

The operation notified to the Commission consists of the acquisition by Blackstone Group of the United States and Canada's Capital Communications CDPQ Inc., the two shareholders controlling Callahan Invest, of Kabel Nordrhein-Westfalen (KNW) from Deutsche Telekom AG, Germany's former telecommunications monopoly. Following the transaction, DT will retain a minority interest of 45 percent in KNW. KNW will provide a range of telecommunications and pay-TV services in Nordrhein-Westfalen, one of the most populated German regions.

The double ownership of both telecommunications and cable TV networks by one and the same operator prevents infrastructure competition, especially on the market for local telephony services. This is the first of a series of sales already concluded or planned, after DT decided, in the course of 1999, to sell part of its nine regional cable TV networks.

KNW will own the regional cable television network assets formerly owned by DT in Nordrhein-Westfalen. It will operate and be active in the provision and distribution of pay-television services. In addition, Callahan Invest intends to build out the existing cable network further and/or acquire other cable companies to increase its penetration of the German market. Callahan Invest will also upgrade the network in order to provide various telecommunications services, including fixed telephony and Internet access services.

KNW is not currently active on the market for pay television in Germany. The Commission found that while immediately after the transaction, KNW will have a de facto monopoly for cable operations in its territory, the transaction itself does not create or strengthen a dominant position on the market for pay-television services in Germany, as KNW is simply taking over the position previously held by DT. After upgrading the cable TV network, KNW will be in a position to compete with DT by offering local telephony and internet access services to end-customers.

KNW will also enter into a number of agreements with DT's subsidiary Media Services GmbH (MSG) to obtain content, technical services, and certain marketing and sales services associated with the offering of pay-television services by KNW to subscribers in Nordrhein-Westfalen. These agreements, however, are not covered by the Commission decision to clear the operation.

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