Case No COMP/M ASTRIUM HOLDING/ VIZADA GROUP. REGULATION (EC) No 139/2004 MERGER PROCEDURE. Article 6(1)(b) NON-OPPOSITION Date: 30/11/2011

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1 EN Case No COMP/M ASTRIUM HOLDING/ VIZADA GROUP Only the English text is available and authentic. REGULATION (EC) No 139/2004 MERGER PROCEDURE Article 6(1)(b) NON-OPPOSITION Date: 30/11/2011 In electronic form on the EUR-Lex website under document number 32011M6393 Office for Publications of the European Union L-2985 Luxembourg

2 EUROPEAN COMMISSION In the published version of this decision, some information has been omitted pursuant to Article 17(2) of Council Regulation (EC) No 139/2004 concerning non-disclosure of business secrets and other confidential information. The omissions are shown thus [ ]. Where possible the information omitted has been replaced by ranges of figures or a general description. Brussels, 30/11/2011 C(2011) 9020 PUBLIC VERSION MERGER PROCEDURE To the notifying party : Dear Sir/Madam, Subject: Case No COMP/M.6393 Astrium Holding/ Vizada Group Commission decision pursuant to Article 6(1)(b) of Council Regulation No 139/ On 26 October 2011, the European Commission received a notification of a proposed concentration pursuant to Article 4 of Council Regulation (EC) No 139/2004 (the "Merger Regulation"), 2 by which the undertaking Astrium Holding SAS ( Astrium, France), an indirect wholly-owned subsidiary of EADS NV ("EADS", Netherlands), acquires, within the meaning of Article 3(1)(b) of the Merger Regulation, control of Mobsat Holding Sàrl ("Mobsat", Luxembourg), the holding company of the Vizada group ("Vizada"), by way of a purchase of shares (Astrium and Vizada are designated hereinafter as the "parties to the proposed transaction"). I. THE PARTIES AND THE OPERATION 2. Astrium is the holding company of EADS Astrium business division. Astrium provides space technologies products and services on a worldwide basis. Its three main areas of activity are: (1) Astrium Space Transportation for launchers and orbital infrastructure; (2) Astrium Satellites for spacecraft and ground segment; and (3) Astrium Services for comprehensive end-to-end solutions covering secure and commercial satellite 1 OJ L 24, , p. 1 ("the Merger Regulation"). With effect from 1 December 2009, the Treaty on the Functioning of the European Union ("TFEU") has introduced certain changes, such as the replacement of "Community" by "Union" and "common market" by "internal market". The terminology of the TFEU will be used throughout this decision. 2 Publication in the Official Journal of the European Union No C 321, , p.15 Commission européenne, 1049 Bruxelles, BELGIQUE / Europese Commissie, 1049 Brussel, BELGIË. Tel.:

3 communications and networks, high security satellite communications equipment, bespoke geo-information and navigation services worldwide. 3. Vizada 3 is an independent provider of satellite-based mobility communication services, serving customers across sectors including maritime, aeronautical, land, media, NGO (non-governmental organizations) and government/defence. It offers mobile and fixed connectivity services both directly and through a distribution network of over 400 resellers. Vizada operates worldwide through subsidiaries in Europe, the US, Latin America, the Middle East, Africa and the Pacific Rim. 4. Pursuant to a Share Purchase Agreement dated 30 July 2011, Astrium will acquire [ ]% of the shares and other securities issued by Mobsat. Following completion of the transaction, Astrium will hold [ ]% of Mobsat s shares and voting rights and exercise sole control over Mobsat and Vizada. 5. Hence, the proposed transaction constitutes a concentration within the meaning of Article 3(1)(b) of the Merger Regulation. II. EU DIMENSION 6. The undertakings concerned have a combined aggregate world-wide turnover of more than EUR million (EADS/Astrium EUR 45,752 million and Vizada [ ] million) 4. Each of them has an EU-wide turnover in excess of EUR 100 million (EADS/Astrium [ ] million and Vizada [ ] million). Moreover, the undertakings concerned achieve a combined aggregate turnover in excess of EUR 100 million in at least three EU Member States (namely [ ] 5 ), where each of them also achieves a turnover in excess of EUR 25 million. Finally, the undertakings concerned do not achieve more than two-thirds of their aggregate EU-wide turnover within one and the same Member State. The notified operation therefore has an EU dimension. III. RELEVANT MARKETS Background 7. Satellite communication services are an extension of terrestrial telecommunication networks (wire line and wireless). A. One-way and two-way satellite communication services 8. The satellite communication sector essentially comprises two types of satellite communications: (1) one-way satellite communication services, which account for the larger part of the satellite communication services industry, and which are mainly used for broadcast (e.g., television and radio) purposes; and (2) two-way satellite communication services, allowing end-to-end exchanges of voice and data between several terminals. 3 Vizada was created in 2007 when the Apax Funds acquired and combined two telecom subsidiaries: France Telecom Mobile Satellite Communications and Telenor Satellite Services. See Commission decision of 20 August 2007, Case COMP/M.4709, Apax Partners / Telenor Satellite Services. 4 Turnover calculated in accordance with Article 5 of the Merger Regulation. 5 EADS/Astrium EUR [ ] million and Vizada [ ] million. 2

4 9. Neither Astrium nor Vizada are active in the provision of one-way satellite communication services, while both parties provide two-way satellite communication services. The "one-way" satellite communication service sector will therefore no longer be discussed in this decision. B. Two-way satellite communication services: Milsatcom and Comsatcom services 10. "Two-way" communication services, in turn, comprise: (1) military two-way satellite communication ( Milsatcom ) services, which are provided to States over frequencies that are exclusively dedicated to secure government and military use; and (2) commercial two-way satellite communication ( Comsatcom ) services, which are provided to military and commercial clients over non-dedicated frequencies. 11. The parties to the proposed transaction submit that Milsatcom services constitute a separate product market from Comsatcom services in light of the fact that: (1) Milsatcom frequencies are by regulation reserved for military/government; (2) Milsatcom services are mission-critical services, which are distinct from the services offered on commercial bands (including to military customers) and sourced at a significantly higher price compared to Comsatcom services; (3) Milsatcom capacity and services are generally owned and operated directly by States; and (4) private operators only play a secondary role in the provision of Milsatcom services in a highly regulated environment. 12. In any event, since Vizada does not provide Milsatcom services, 6 the question whether Milsatcom services constitute a separate product market from Comsatcom services can be left open and the Milsatcom service sector will no longer be discussed in this decision. C. Comsatcom services 13. In Comsatcom services, the satellite communication service connects the end user s terminal to the satellite, which, in turn, is connected to either a land earth station ( LES ) (for mobile services) or a teleport (for fixed services). These terminals are, in turn, linked to a terrestrial-based telecommunication network or another end-user terminal, thus allowing end-to-end exchanges of data between the connected terminals. 14. Comsatcom services comprise both Mobile Satellite Services ("MSS") and Fixed Satellite Services ("FSS"). 7 MSS consist of the provision of mobile satellite communication solutions, i.e., voice, data and IP telecommunication services, to mobile end-users in remote areas not covered by terrestrial communication systems (e.g., a ship in the middle of the ocean). FSS consist of the provision of stationary satellite communication solutions, i.e. voice, data and IP telecommunication services, to (semi-) stationary end-users in remote areas not covered by terrestrial communication systems (e.g., an oil platform in the ocean). 6 Astrium is active in Milsatcom through its subsidiary Paradigm. Astrium is one of three private players in the world authorized by governments to act as Milsatcom Satellite Network Operator. 7 FSS can also be designated as "VSAT" services from the name "Very Small Aperture Technology" used to provide this type of services. 3

5 15. Value chain. The value chain of the Comsatcom service sector can be described as involving three levels, namely Satellite Network Operators ("SNOs"), Satellite Service Providers ("SSPs") and resellers. 16. SNOs. At the upstream level of the value chain, SNOs own and manage the satellite fleets and wholesale airtime/capacity on their satellites. The main SNOs have fleets covering the entire world. Even regional SNOs have fleets covering at least several continents. 17. SSPs. SSPs act as middlemen. They assemble a package of communication solutions consisting of Comsatcom airtime/capacity purchased from SNOs, so-called valueadded services and terminals. SSPs customers are either large end customers with significant needs in terms of volume and with complex technical requirements, or resellers. 18. Resellers. Resellers purchase satellite capacity communication and value-added services from SSPs (or even directly from SNOs) and distribute them to end-users. They are also often in charge of the provision, the installation and the maintenance of the equipment. 19. The activities of the parties to the proposed transaction at the different levels of the Comsatcom service value chain can be summarized as follows: SNO. Neither party is active as an SNO. 8 SSP. Both parties are active in the wholesale provision of each of MSS and FSS services. Astrium is mainly active in the provision of FSS, which account for almost [ ]% of Astrium s wholesale Comsatcom revenues. Moreover, Astrium achieves almost [ ] of its total (MSS and FSS) wholesale Comsatcom revenues in the [ ] area of use. In addition, Astrium does not achieve any sales with resellers, but provides its services only to end customers. Vizada is mainly active in the provision of MSS for each of maritime, land, and aeronautical areas of use. Vizada is also active in the provision of FSS. Vizada achieves the vast majority (around [ ]% in 2010) of its wholesale revenues through sales to resellers, with the remaining portion being accounted for sales to end customers. Resellers. Astrium's activities at the retail level are very limited [ ], while Vizada, through its "Marlink" group of subsidiaries, is active in the retail provision of MSS and FSS to maritime end customers. 9 8 For completeness, it is noted that Astrium, through its subsidiaries, is active upstream in the provision to SNOs of different products and services, including geostationary orbit telecommunications satellite systems, together with a range of associated ground infrastructure, ground segment and system integration services, and launching services. Astrium, however, submits that the satellite manufacturing sector is fragmented and highly competitive, with a number of strong players active on the market. In any event the parties' activities do not overlap vertically. Therefore, in this respect the transaction does not raise serious doubts as to the compatibility with the internal market. 9 For completeness, it is noted that the EADS group (but not Vizada) is also active in the provision of in-flight passenger connectivity solutions through the joint venture OnAir, where Airbus holds a 4

6 D. Comsatcom equipment 20. Terminals are the equipment used by end-users to receive and send communications via satellite. Terminals are developed either by the SNOs or by independent manufacturers on the basis of standards and protocols provided by SNOs. Terminals are generally specific to each SNO system. 21. Astrium, through its subsidiary ND Satcom, supplies Comsatcom FSS terminals for land applications, as well as system integration services, to some of its clients. Vizada sells to end customers or resellers MSS terminals, which it purchases from SNOs or from equipment manufacturers. For both parties (and, in particular, for Vizada), Comsatcom equipment sales are very limited and ancillary to the sale of Comsatcom services. Relevant product market A. Comsatcom services (wholesale and retail) 22. The parties to the proposed transaction submit that the relevant product markets for the purposes of this transaction are: (1) the Comsatcom services wholesale market, which encompasses the distribution by SSPs to (large) end customers and resellers of airtime/capacity for both MSS and FSS and for any area of use (aeronautical, land and maritime); and (2) the Comsatcom services retail market, which encompasses the distribution by resellers of MSS and FSS for all areas of use. 23. The Commission analyzed the Comsatcom services sector in its Apax Partners/Telenor decision, 10 where it identified: (1) a Comsatcom services wholesale market; and (2) a Comsatcom services retail market, while leaving the question open as to whether further segmentations of either product market based on the type of service (i.e. MSS v FSS) and/or the area of use (land, sea, air) are warranted. 24. Since the proposed transaction will not raise competition concerns on any product market definition, the exact scope of the relevant product market can be left open for the purposes of this case. B. Comsatcom equipment 25. The parties to the proposed transaction submit that the relevant product market is the market for the manufacture and supply of Comsatcom equipment for both mobile and fixed applications and for all areas of use. 26. The Commission analysed the manufacture and supply of Comsatcom equipment in its Thrane and Thrane/Nera decision, 11 where it considered that separate relevant product jointly controlling shareholding (see Case COMP/M.3657, Airbus/Sita). OnAir's services consist of the provision of telecommunications and Internet services to commercial airline passengers. The parties to the proposed transaction submit that OnAir's solutions belong to a product market, which is separate from, albeit neighbouring to, the provision of Comsatcom services for the aeronautical area of use. Given the absence of overlap between the parties' activities, these services will only be briefly discussed in this decision in the context of the analysis of the non-horizontal effects of the proposed transaction. 10 Case COMP/M.4709, Apax Partners/Telenor Satellite Services, paras. 9 and Case COMP/M.4465, Thrane & Thrane/NERA. 5

7 markets should be defined for the supply of Comsatcom equipment for each of land, maritime, 12 and aeronautical use. 27. Since the proposed transaction will not raise competition concerns on any product market definition, the exact scope of the relevant product market can be left open for the purposes of this case. Relevant geographic market A. Comsatcom services (wholesale and retail) 28. The parties to the proposed transaction submit that the geographic scope of the Comsatcom services wholesale market (and its possible segments) is worldwide. 29. In its Apax Partners/Telenor decision, 13 the Commission took the view that the geographic scope of the Comsatcom services wholesale market could be considered to be worldwide. 30. As regards the Comsatcom services retail market, the parties to the proposed transaction submit that this market is worldwide or, at least, regional. 31. In its Apax Partners/Telenor decision, 14 the Commission left the geographic scope of the retail Comsatcom services (and its possible segments) open. 32. For the purposes of this case, and consistent with the Apax Partners/Telenor decision, the Commission will consider the Comsatcom services wholesale market to be worldwide. As regards the Comsatcom services retail market since the proposed transaction will not raise competition concerns on any geographic market definition, the exact scope of the relevant geographic market can be left open for the purposes of this case. B. Comsatcom equipment 33. The parties to the proposed transaction consider that the market for manufacture and supply of Comsatcom equipment is worldwide in scope. 34. In its Thrane and Thrane/Nera decision, 15 the Commission took the view that, at least with respect to maritime communication equipment and land earth stations, the geographic scope of the market was indeed worldwide. 35. For the purposes of this case, and consistent with the Thrane and Thrane/Nera decision, the Commission will consider the Comsatcom equipment market to be worldwide. 12 As to the maritime area of use, the Commission further held that there was a separate market for Inmarsat-C communication equipment as it is mandatory to have this terminal on board to comply with the Global Maritime Distress Safety Services (GMDSS) legal requirements. As for equipment for communication needs, the Commission identified two separate markets for low-end maritime communication equipments and high-end maritime communication equipments. 13 Case COMP/M.4709, Apax Partners/Telenor Satellite Services, para Case COMP/M.4709, Apax Partners/Telenor Satellite Services, para Case COMP/M.4465, Thrane & Thrane/NERA. 6

8 IV. COMPETITIVE ASSESSMENT Horizontal aspects 36. Comsatcom services (wholesale and retail). The overall Comsatcom services wholesale market is not affected by the proposed transaction, since, post merger, the parties to the proposed transaction will hold a [10-20]% combined share at the worldwide level. 37. However, should the Comsatcom services wholesale market be segmented between MSS and FSS and/or by area of use of the service (land, air, and sea), the following market segments would be affected: (1) wholesale of MSS, where the merged entity would hold a share of [20-30]%; (2) wholesale of Comsatcom services for the maritime area of use, where the merged entity would hold a combined share of [20-30]%; and (3) wholesale of MSS for the maritime area of use, where the merged entity would hold a combined market share of [20-30]% Wholesale of MSS. As shown by Table 1 below, post transaction, Inmarsat would remain the leader with a share of [30-40]%. The merged entity would follow with a [20-30]% share (Vizada, [20-30]%; Astrium [0-5]%). Other players would include SingTel [(5-10]%), KDDI [(5-10]%), Satcom group, [(0-5]%), and MVS [(0-5]%). Table 1: MSS wholesale market (2010) Astrium [0-5]% Vizada [20-30]% Astrium + Vizada [20-30]% Inmarsat Group [30-40]% SingTel [5-10]% KDDI [5-10]% Satcom Group [0-5]% MVS [0-5]% Applied Satellite Technology [0-5]% Others [20-30]% Source: parties best estimates 39. Wholesale of Comsatcom services for maritime area of use. As shown by Table 2 below, post transaction, Inmarsat would remain the leader with a share of [20-30]%. The merged entity would follow with a combined [20-30]% share (Vizada, [20-30]; Astrium, [0-5]%). Other players would include MTN [5-10]%), Satcom Group ([5-10]%), SingTel (5-10]%), and KDDI (5-10]%). 16 The activities of the parties to the proposed transaction also overlap in other market segments, which however will not be affected by the transaction within the meaning of the Form CO. 7

9 Table 2: Wholesale of Comsatcom services for maritime area of use (2010) Astrium [0-5]% Vizada [20-30]% Astrium + Vizada [20-30]% Inmarsat Group [20-30]% MTN [5-10]% Satcom Group [5-10]% SingTel [5-10]% KDDI [5-10]% Harris Caprock [0-5]% Globecomm Systems [0-5]% Others [20-30]% Source: parties best estimates 40. Wholesale of MSS for maritime area of use. As shown by Table 3 below, post transaction, Inmarsat would remain the leader with a share of [30-40]%. The merged entity would follow with a combined [20-30]% share (Vizada, [20-30]%, Astrium, [0-5]%). Other players would include Satcom Group [(5-10]%), KDDI, SingTel, and MVS. Table 3: Wholesale of MSS for maritime area of use (2010) Astrium [0-5]% Vizada [20-30]% Astrium + Vizada [20-30]% Inmarsat Group [30-40]% Satcom Group [5-10]% Others [20-30]% Source: parties best estimates 41. In view of the limited market share that the merged entity would hold post transaction (less than [20-30]% on the narrowest market considered), the minimal increments in market share arising from the proposed transaction (not exceeding [0-5]%) and the presence of a stronger competitor in each of the above identified potentially affected markets, it is concluded that the proposed transaction does not raise serious doubts on any Comsatcom services market at the wholesale level. 42. At the retail level the activities of the parties to the proposed transaction also overlap but to a very limited extent. No Comsatcom market segment would be affected at the retail level, as the combined market share of the parties to the proposed transaction would remain well below 15% on any geographic market definition. Therefore, the proposed transaction will also not raise serious doubts on any relevant Comsatcom service market at the retail level. 43. Comsatcom equipment. The market for the manufacture and supply of Comsatcom equipment is also not an affected market, as: (1) Vizada is only active in this market as a reseller of third party equipment; and (2) Astrium's share is below 5% (including in the only product segment where Astrium is actually active, i.e., the manufacture and supply of FSS equipment for the land area of use). Therefore, the proposed transaction will also not raise serious doubts on any relevant Comsatcom equipment market. 8

10 Non-horizontal aspects A. Vertical aspects 44. Wholesale market for Comsatcom services and retail markets for Comsatcom services. As regards input foreclosure, the merged entity will not hold a share in excess of 30% in any Comsatcom market segment at the wholesale level, with the exception of the wholesale supply of Comsatcom services to aeronautical customers, where Vizada currently holds a market share of [30-40]%. However, neither party is active downstream in the retail of Comsatcom services to aeronautical customers. 45. As regards customer foreclosure, the merged entity's share in any possible segment of the Comsatcom retail market will be well below 10%. 46. Therefore, in line with the Commission's Guidelines on the assessment of non-horizontal mergers 17, the proposed transaction will also not give rise to any input and/or customer foreclosure concern as a result of the combination of the merging parties' activities in the wholesale and retail markets for Comsatcom services. 47. Manufacture and supply of Comsatcom equipment and wholesale of Comsatcom services. As regards input foreclosure, the merged entity will hold a share below 15% in the Comsatcom equipment manufacture and supply market (and/or in the possible segments thereof). Consequently, the new entity would not have sufficient market power to successfully engage in any input foreclosure strategy vis-à-vis its competitors on the wholesale market of Comsatcom services As regards customer foreclosure, the merged entity would account for a share in excess of 30% only in the wholesale of Comsatcom services for the aeronautical area of use. However, the merged entity does not currently manufacture and/or supply Comsatcom equipment for the provision of Comsatcom services for this area of use. 49. Therefore, in line with the Commission's Guidelines on the assessment of non-horizontal mergers 18, the proposed transaction will also not give rise to any input and/or customer foreclosure concern as a result of the combination of the merging parties' activities in the manufacture and supply of Comsatcom equipment and in the wholesale of Comsatcom services. 50. Finally, there is no vertical link between the activities of the EADS group as aircraft manufacturer (through Airbus) and the activities of Vizada. Comsatcom suppliers in the aeronautical sector do not normally supply their services to aircraft manufacturers (nor to airlines directly), but they rather provide their services to resellers, which, in turn, contract with airlines. 51. In light of the above, it is concluded that the proposed transaction will not give rise to serious doubts on any relevant Comsatcom service or equipment markets as a result of the combination of the wholesale and retail Comsatcom services activities of the parties to the proposed transaction. 17 See in particular paragraphs 23 and following of the Guidelines. 18 See in particular paragraphs 23 and following of the Guidelines. 9

11 B. Conglomerate aspects 52. Combination of the activities of the EADS group in the manufacturing and selling of aircrafts with Vizada's activities in the provision of Comsatcom services for the aeronautical area of use. It seems likely that the merged entity will not have the ability to engage in any tying or bundling conduct post merger for a number of reasons, including the fact that: (1) in the aeronautical sector, SSPs have no direct commercial relationship with airlines (but only with resellers, which, in turn, contract with airlines); and (2) the choice of the SSP from whom to purchase Comsatcom services lies exclusively with the airlines and cannot be influenced by the aircraft manufacturer (this also reflects the fact that there is no SSP-specific equipment that manufacturers could linefit on their aircraft to force or induce airlines to use a specific SSP s services. Comsatcom aeronautical equipment is indeed SNO-specific, not SSP- and/or reseller-specific). 53. Moreover, given the size of EADS' revenues from the sale of aircrafts and of Vizada's revenues from the provision of Comsatcom services to aeronautical customers, 19 it is equally doubtful whether, given the size of the respective businesses, post merger EADS would try to impose upon Airbus' customers Vizada as an SSP provider (at the risk of jeopardising Airbus' commercial relationship with these customers) in an attempt to increase the group's revenues deriving from the supply of Vizada's services. 54. Therefore, based on the above, it seems unlikely that, post merger, EADS will have the ability and the incentive to tie and/or bundle the sale of aircrafts (through Airbus) with Vizada's activities in the provision of Comsatcom services for the aeronautical area of use. 55. Combination of the activities of the EADS group in the provision of in-flight connectivity solutions with Vizada's activities in the provision of Comsatcom services for the aeronautical area of use. The parties to the proposed transaction submit that the merged entity will also not have any ability and/or incentive to tie and/or bundle Vizada s Comsatcom services with OnAir services post merger for a number of reasons including the fact that: (1) in line with Airbus security policy, cockpit and cabin connectivity have to be physically separated, which would make a physical / technical bundling of OnAir's and Vizada's services impossible; and (2) a commercial bundle would also not be possible given that Vizada does not currently sell directly to airlines, but to resellers, while OnAir generates its turnover with airlines passengers (and not with airlines). 56. Therefore, it seems unlikely that, post merger, EADS will have the ability to tie and/or bundle the provision of in-flight connectivity solutions (through OnAir) with Vizada's activities in the provision of Comsatcom services for the aeronautical area of use. As a result, it can be concluded that post merger EADS is unlikely to engage in any tying and/or bundling strategy of Vizada's Comsatcom services with OnAir services. 57. In light of the above, it is concluded that the proposed transaction will not give rise to serious doubts on any relevant Comsatcom service or equipment markets as a result of the combination of the activities of the EADS group in the manufacturing and selling of aircrafts (through Airbus) or in the provision of in-flight connectivity solutions (through OnAir) and of Vizada's activities in the provision of Comsatcom services for the aeronautical area of use. 19 In 2010, Airbus' turnover was around EUR 30 billion and Vizada s revenues in the aeronautical sector around USD [ ] million in

12 VI. CONCLUSION 58. For the above reasons, the European Commission has decided not to oppose the notified operation and to declare it compatible with the internal market and with the EEA Agreement. This decision is adopted in application of Article 6(1)(b) of the Merger Regulation. For the Commission (signed) Joaquín ALMUNIA Vice-President 11