EU launches investigation into e&'s purchase of PPF Telecom

The investigation will assess, under the Foreign Subsidies Regulation, the deal which would leave e& in sole control of PPF Telecom, excluding its Czech business. The Commission says it has preliminary concerns that e& may have been granted foreign subsidies that could distort the EU internal market.

These alleged subsidies take the form of an unlimited guarantee from the UAE and a loan from UAE-controlled banks facilitating the transaction, and these types of subsidies are among the most likely to cause this market distortion, says the Commission.

“The Commission has concerns that such subsidies may have improved e&'s capacity to perform the acquisition as well as the competitive position of the merged entity in the EU going forward, notably by improving its capacity to finance its EU activities at preferential terms,” states the release.

The investigation’s purpose is to decide whether the subsidies would both lead to negative effects in the internal market ‘with respect to the merged entity's activities’, as well as the acquisition process, particularly: ‘if the support has altered the outcome of that process by allowing e& to deter or outbid other parties interested in the acquisition and/or by allowing e& to perform the acquisition in the first place.’

The FSR kicked in in July 2023 and is a new set of rules that enables the Commission to address distortions caused by foreign subsidies, and thereby ‘allows the EU to ensure a level playing field for all companies operating in the internal market while remaining open to trade and investment.’

Companies must notify ‘concentrations’ to the Commission when at least one of the merging companies, the acquired company or the joint venture is established in the EU and generates an EU turnover of at least €500 million, and when the parties were granted at least €50 million in combined aggregate foreign financial contributions from ‘third countries’ in the three years prior to the concentration, explains the release.

The deal was announced in August last year, which at the time was valued at up to €2.5 billion, and it will see e& will take a stake of 50% plus one share in in PPF Telecom’s assets in Bulgaria, Hungary, Serbia, and Slovakia. Those assets comprise the Yettel operations in in the first three markets listed, plus O2 Slovakia, and the CETIN and O2 Networks infrastructure businesses in all four countries.

Earlier that year e& said it was in a ‘growth phase’ after some strong 2022 financials, and hinted at its intention to engage in some M&A.

The Commission now has 90 working days, until 15 October 2024, to make a decision. ‘The opening of an in-depth investigation does not prejudge the outcome of the investigation’ stipulates the release, which you’d certainly hope was the case.