Home » FNE approved merger of Claro with VTR and ordered return of spectrum as a structural measure

FNE approved merger of Claro with VTR and ordered return of spectrum as a structural measure

by archyde

The National Economic Prosecutor’s Office (FNE) approved the merger of Claro with VTR, but asked the operators to execute a series of mitigation measures to carry out the concentration operation.

The organism ruled out the existence of unilateral risks of price increase or quality decrease in the retail segment for the joint development of fixed services (internet, pay TV and telephony) and mobile services (telephony, internet, and SMS and MMS messaging).

In the case of fixed internet services, the investigation carried out by the FNE concluded that the joint venture will be effectively “disciplined” by the competitive pressure exerted by other incumbent players, such as Movistar Chile and Entel, or new entrants, such as Mundo, both nationally and locally. In addition, all of them, unlike VTR and Claro, have a technological advantage by having fiber optic networks, in addition to having relevant expansion plans.

Regarding the pay TV market, the FNE verified that there are other relevant operators that would also put competitive pressure on the entity resulting from the joint venture and projected that new forms of viewing, such as streaming and over-the-top platforms, would continue to do so with even stronger in the future.

As for fixed telephony, the risks were ruled out due to the significant drop that this segment has suffered in recent years.

Mitigation measures

The authority did warn that, if there are no structural mitigation measures, the operation generated a risk capable of substantially reducing competition in wireless services, due to the possible hoarding of the radio spectrumconsidered an essential input for the provision of mobile services.

To reduce the risk, VTR and Claro offered the FNE various proposals for mitigation measures. After the fifth presentation of the parties, the FNE considered the remedies offered as effective, since they consisted of a feasible spectrum disinvestment package to be tendered by the Undersecretary of Telecommunications in the future and capable of attracting the interest of potential buyers.

It involves the return of 10MHz of spectrum to the State in the medium macro band (3.5 MHz band) and another 10MHz of spectrum in the low medium macro band (AWS band), in addition to updating the plan for the effective and efficient use of spectrum that Claro currently owns.

For the FNE, these measures guarantee that the joint venture will effectively and efficiently use all of the spectrum that it will maintain under its ownership and are effective and suitable to prevent the operation from generating a substantial reduction in competition. In addition, they are feasible to implement, execute and monitor and proportional to the competition risks detected.

Additionally, the FNE represented VTR and Claro that the joint venture could violate a resolution issued by the Court for the Defense of Free Competition (Resolution 1/2004), in which it prohibited VTR and its controller from participating in the ownership of operating companies. of satellite television in Chile.

Given this, the parties promised before the FNE to comply with said resolution, transferring the assets of Claro’s satellite television business to a fiduciary agent, outside the scope of administration of the joint venture, before materializing it, who will be in charge of divesting them. to a third party independent of VTR and Claro, within a certain period.

The Claro team was led by the law firm specializing in this area, Pellegrini & Rencoret, whose team was made up of two of its partners, Pedro Rencoret and Julio Pellegrini, and their associate, Catalina Sierpe; while on the VTR side, the FerradaNehme law firm was in charge, with its lawyers Nicole Nehme, Benjamín Mordoj and Sebastián Dufeu.

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