The Competition Commission of Pakistan (CCP) today granted conditional approval to a cross border acquisition of Wind Telecom by VimpelCom Ltd. after undertaking Phase-II review of the transaction to address the competition concerns. VimpelCom submitted a pre-merger application with CCP regarding the proposed acquisition of Wind Telecom S.p.A. (formerly Weather Investments S.p.A.), an Italian private company. The target Wind Telecom indirectly holds approx. 51.7% shares in Orascom Telecom Holdings, S.A.E (OTH), an Egyptian company, which has a 100% owned subsidiary in Pakistan, Pakistan Mobile Communications Limited (PMCL) and various other subsidiaries operating in telecommunications and related sectors in Pakistan. The transaction involves an amalgamation of two leading international telecommunication groups, Vimpelcom and Wind Telecom which shall create the world’s sixth largest mobile telecommunication carrier measured by the number of subscribers. The acquisition of Wind Telecom by Vimplecom will result in indirect change of control of OTH, and its subsidiaries in Pakistan; the fact that Telenor (Norway) will have 31.7% equity shares and 25% voting shares in Vimplecom after the transaction gets consummated, raise competition concerns, which prompted CCP to open the Phase-II review of the transactions. The relevant market in the instant case in an oligopolistic market, wherein the potential for coordinated effects (also referred to as “joint dominance” or “collective dominance” or “tacit collusion”) are high, as the competitors are able to coordinate their commercial conduct (eg., prices, output, innovation etc.). The presence of Telenor (Norway) in the board of VimpelCom raises the potential for coordination (tacit collusion) between PMCL and Telenor Pakistan. CCP Member Dr. Joseph Wilson issued the approval with the following conditions: i. PMCL would, as appropriate under Pakistani law, pass resolutions at the board and/or amend its constitutional documents (i.e., Articles of Association) with respect to criteria for being nominated and serving as a director. Directors or other representatives of the Telenor group, would not be eligible to serve on the board of directors or equivalent governing body of PMCL or any of its subsidiaries currently operating in Pakistan, so long as Telenor operates a subsidiary that is in competition with Orascom Telecom and/or PMCL in Pakistan. ii. Management of VimpelCom, OTH and PMCL (and other relevant subsidiaries in Pakistan) are expressly prohibited by board resolutions, through proper procedures, or in any other manner from sharing commercially sensitive information relating to the businesses of VimpelCom and its subsidiaries in Pakistan with Telenor or representatives of the Telenor group and from entering into any arrangement with Telenor Pakistan to procure goods and services, other than arrangements of the kind presently in place, except (A) on an arms-length basis, or (B) to the extent generally or specifically permitted by the Pakistan Telecommunication Authority (for example, infrastructure sharing) or the Competition Commission of Pakistan. iii. Each of VimpelCom and OTH would put in place corporate resolutions prohibiting any person serving on its board of directors or equivalent body who is affiliated with Telenor (i.e., an officer, director or other employee of the Telenor group) from participating in discussions or decisions that relate to PMCL or other operations of VimpelCom or OTH in Pakistan.
The Competition Commission of Pakistan (CCP) today granted conditional approval to a cross border acquisition of Wind Telecom by VimpelCom Ltd. after undertaking Phase-II review of the transaction to address the competition concerns.
VimpelCom submitted a pre-merger application with CCP regarding the proposed acquisition of Wind Telecom S.p.A. (formerly Weather Investments S.p.A.), an Italian private company. The target Wind Telecom indirectly holds approx. 51.7% shares in Orascom Telecom Holdings, S.A.E (OTH), an Egyptian company, which has a 100% owned subsidiary in Pakistan, Pakistan Mobile Communications Limited (PMCL) and various other subsidiaries operating in telecommunications and related sectors in Pakistan.
The transaction involves an amalgamation of two leading international telecommunication groups, Vimpelcom and Wind Telecom which shall create the world’s sixth largest mobile telecommunication carrier measured by the number of subscribers. The acquisition of Wind Telecom by Vimplecom will result in indirect change of control of OTH, and its subsidiaries in Pakistan; the fact that Telenor (Norway) will have 31.7% equity shares and 25% voting shares in Vimplecom after the transaction gets consummated, raise competition concerns, which prompted CCP to open the Phase-II review of the transactions.
The relevant market in the instant case in an oligopolistic market, wherein the potential for coordinated effects (also referred to as “joint dominance” or “collective dominance” or “tacit collusion”) are high, as the competitors are able to coordinate their commercial conduct (eg., prices, output, innovation etc.). The presence of Telenor (Norway) in the board of VimpelCom raises the potential for coordination (tacit collusion) between PMCL and Telenor Pakistan.
CCP Member Dr. Joseph Wilson issued the approval with the following conditions:
i. PMCL would, as appropriate under Pakistani law, pass resolutions at the board and/or amend its constitutional documents (i.e., Articles of Association) with respect to criteria for being nominated and serving as a director. Directors or other representatives of the Telenor group, would not be eligible to serve on the board of directors or equivalent governing body of PMCL or any of its subsidiaries currently operating in Pakistan, so long as Telenor operates a subsidiary that is in competition with Orascom Telecom and/or PMCL in Pakistan.
ii. Management of VimpelCom, OTH and PMCL (and other relevant subsidiaries in Pakistan) are expressly prohibited by board resolutions, through proper procedures, or in any other manner from sharing commercially sensitive information relating to the businesses of VimpelCom and its subsidiaries in Pakistan with Telenor or representatives of the Telenor group and from entering into any arrangement with Telenor Pakistan to procure goods and services, other than arrangements of the kind presently in place, except
(A) on an arms-length basis, or
(B) to the extent generally or specifically permitted by the Pakistan Telecommunication Authority (for example, infrastructure sharing) or the Competition Commission of Pakistan.
iii. Each of VimpelCom and OTH would put in place corporate resolutions prohibiting any person serving on its board of directors or equivalent body who is affiliated with Telenor (i.e., an officer, director or other employee of the Telenor group) from participating in discussions or decisions that relate to PMCL or other operations of VimpelCom or OTH in Pakistan.
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