The highest court of instance overturned a ruling by the Federal Administrative Court, which had largely confirmed the decision of the Competition Commission. According to the Federal Supreme Court ruling published on Thursday evening, Swisscom did have a dominant market position when it was awarded the contract for a Swiss Post network.
However, it did not impose unreasonable prices on either its competitor Sunrise or Swiss Post. In both cases, the element of enforcement was missing. According to the Federal Supreme Court, Swisscom acted correctly when setting prices for wholesale products, on which Sunrise was dependent. Furthermore, it was not proven that the prices were unreasonable or grossly excessive.
In the case of Swiss Post, the hammer price was the result of negotiations and was therefore not unilaterally determined by Swisscom. Apart from this, the Federal Court found that there was no element of unreasonableness, as the award price and Swisscom's profit margin were not to be regarded as excessively excessive. Finally, there was also no abusive behavior on the part of Swisscom in the sense of a margin squeeze vis-à-vis Sunrise.
In 2008, Swiss Post invited tenders for the construction and operation of a wide area network for its approximately 2,300 locations. Swisscom was awarded the contract. Sunrise, which lost out, filed a complaint with the Competition Commission. The ComCo came to the conclusion that Swisscom had violated the Cartel Act by abusing its dominant market position.
Specifically, the Competition Commission accused Swisscom of imposing unreasonable prices on Sunrise and Swiss Post, as well as a margin squeeze on Sunrise. The Competition Commission imposed a fine of CHF 7.9 million for this. The Federal Administrative Court rejected the main points of Swisscom's appeal against this, but reduced the fine to CHF 7.5 million.
With the margin squeeze, dominant companies cut the profit margins of competitors in a downstream market in which the competition sells its products. (SDA)
(judgment B-8386/2015)
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An in-depth examination revealed that the takeover would eliminate competition in the market for addressed bulk mail items weighing over 50 grams for business customers, the Competition Commission announced on Friday. In addition, Swiss Post would also gain a dominant position in other areas, such as the delivery of newspapers and magazines.
Other prospective buyer
The Quickmail Group had argued that it was no longer economically feasible to continue the business independently due to negative figures. The Competition Commission did not dispute this in its decision. However, a restructuring takeover could only have been permitted if Quickmail was expected to disappear from the market anyway - and customers would have switched to Swiss Post, according to the press release. This was not the case, as another company was also interested in Quickmail.
The Quickmail Group, with its two subsidiaries Quickmail and Quickpac, delivers letters, unaddressed items such as advertising flyers, newspapers and magazines as well as parcels throughout Switzerland. It was not clear from the ComCo's communiqué which company the alternative prospective buyer was. The Competition Commission merely wrote that the prospective buyer had many years of experience in the postal services sector.
"Liberalization has failed"
In a statement, the Quickmail Group expressed its shock at the Weko's decision. The solution negotiated with Swiss Post would have brought stability and continuity to both employees and customers. Instead, 3000 jobs are now at risk.
The company voiced fundamental criticism. The liberalization of the postal market in Switzerland had failed. This is because Swiss Post's residual monopoly in the letter market has ultimately led to a cut-throat battle with unequal competition - while at the same time letter volumes are continuing to fall.
Swiss Post signed the purchase agreement for Quickmail and Quickpac in July (Werbewoche.ch reported). The decision of the Competition Commission is acknowledged, regretted and will now be analyzed in depth. The aim of the takeover would have been to ensure seamless operations for customers, according to Swiss Post. (SDA)
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Nothing now stands in the way of integrating the stations, it said. The teams of the three radio stations would be integrated into the Radio division under the management of Nicola Bomio.
The three channels will continue to be operated from the Rotkreuz ZG site, CH Media announced. In the new organization, they will receive national content from a central newsroom. Alfons Spirig, the former owner of Central, Sunshine and Eviva, will support CH Media as an advisor.
Takeover retroactive to January 2022
CH Media, which already operates a station in the region with Lucerne's Radio Pilatus, had already taken over the three stations retroactively as of the beginning of January 2022. In return, CH Media had to hand over the Radio Bern1 license, following the return of the Radio 32 license. Last September, it was announced that the editorial teams would remain independent and the jobs would be retained.
Last fall, the Federal Council had decided that Central Switzerland would receive a new licensed radio station with fee money from 2025. CH Media explained at the time that the federal government's decision to create a license for an information radio station with a fee share for Central Switzerland had no influence on the sales negotiations.
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Naturally, this will be more expensive because more lines will have to be laid and more roads torn up. Swisscom is therefore trimming its expansion targets: It now wants to achieve coverage of only 50 to 55 percent of the population by the end of 2025. The annual budget for fiber-optic investments of 500 to 600 million Swiss francs remains unchanged.
The "blue giant" actually had the goal of doubling the number of fiber-optic connections from one-third of households and businesses to around 60 percent by the end of 2025. This would be 1.5 million more fiber-optic connections than today. Coverage of 70 to 80 percent is then to be achieved by 2030.
400,000 connections blocked
However, the Federal Competition Commission Weko had stopped the fiber optic rollout because it considers Swisscom's modified network architecture with only one feed line from the telephone exchange to the street shaft to be anti-competitive. The Weko is insisting on a four-fiber rollout.
Swisscom's appeals against the Weko's precautionary measures have so far been unsuccessful. The main proceedings are still ongoing. A formal decision is not expected before the first quarter of 2023, the group said.
The Weko veto has now blocked almost 400,000 fiber-optic connections that Swisscom has built in the meantime but is not allowed to put into operation. And 70,000 more connections would be added every quarter. The fiber-optic partnership with Salt has been on ice for months. This means massive revenue losses.
Now the pressure on the industry leader has become too great: "Business can no longer wait," the Group wrote in the analyst presentation. In order for customers to be able to use the fast fiber-optic connections, Swisscom has decided to build new connections largely in the point-to-point architecture in the network expansion, it said.
And the nearly 400,000 connections that have been blocked so far will be partially converted to the model with direct lines from the connection center to the household. Swisscom explained that talks are underway with Salt to adapt the partnership to the new circumstances, without giving details.
Solid operating business
Swisscom's operating performance was solid: Revenue fell slightly by 1.4 percent to CHF 8.2 billion in the first nine months. The slight decline was due to the weak euro, which depressed the results of the Italian broadband subsidiary Fastweb in Swiss francs. Operating profit before depreciation and amortization (EBITDA) fell by 3.6 percent to CHF 3.3 billion.
Net profit, however, dipped by 21 percent to CHF 1.2 billion due to special effects. In the previous year, revaluations from a Fastweb fiber-optic cooperation and the sale of a stake in Belgium had resulted in a one-time gain of CHF 207 million. In addition, there were one-time effects in tax expense.
On the other hand, Swisscom booked a fine of almost CHF 72 million from the Weko this year. Without these special effects, net profit would have increased by 2.5 percent, Swisscom wrote.
Sales target lowered due to euro weakness
In view of the weakness of the euro, Swisscom is now lowering its annual revenue targets slightly to CHF 11.1 billion. Previously, Switzerland's largest telecommunications group had targeted sales of 11.1 to 11.2 billion.
By contrast, the other targets for the full year 2022 remain unchanged. EBITDA is expected to reach around CHF 4.4 billion and capital expenditure around CHF 2.3 billion. If the targets are met, shareholders will also receive an unchanged dividend of CHF 22 for the current year. (SDA)
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The acquisition not only significantly increases Valora's presence in the convenience business at service stations, but will also give it the largest convenience outlet network in Switzerland, with some 370 avec stores by the end of 2023.
Valora's intensified cooperation with Oel-Pool, one of Switzerland's largest service station operators, represents a further milestone in its growth-oriented food strategy, the company reports. As Valora expands its convenience presence at service stations, the higher-margin food component of its overall category mix continues to grow.
The gradual takeover of the 71 service station stores from Oel-Pool is expected to take place from April 2023. The stores are located at BP service stations in western, northwestern and eastern Switzerland. They are to be successively converted into avec stores with a comprehensive convenience range. All locations are secured for the long term.
The cooperation with Moveri, the fuel company of Oel-Pool, and the acquisition of 39 service station stores, primarily under the Aperto brand, had already been announced in summer 2021. Most of these stores were transferred to the avec outlet network between January and May 2022. Thanks to the expanded cooperation with Oel-Pool, Valora will increase its presence at Swiss service stations to over 170 stores by the end of 2023, including Tamoil locations. The food convenience provider also expects to achieve annual sales of over CHF 300 million in its service station business in the medium term.
Thanks to the cooperation with Oel-Pool and Moveri and the ongoing conversion of "k kiosk" outlets into avec stores, the total avec outlet network in Switzerland will grow to around 370 outlets by the end of 2023. This will make the avec brand, which was modernized in summer 2018, the convenience provider with the most sales outlets in Switzerland.
Weko still has to approve the deal
"The expanded collaboration with Oel-Pool reinforces our conviction that the food convenience business will remain attractive in the future," says Michael Mueller, CEO of the Valora Group. "In addition to locations in city centers, at transport hubs such as railroad stations and airports, and in shopping malls, filling station stores are an ideal fit for our store portfolio. They will also further strengthen the avec brand and also the food component of our business."
Valora has been active in the service station business in Switzerland for some 20 years. In addition to Tamoil stores with a strong presence in western Switzerland and the greater Zurich area, Valora has also been able to successively expand its portfolio of locations in German-speaking Switzerland. A large proportion of customers shop at service stations without filling up. They come by for the good location, long opening hours and convenience range.
The acquisition of the 71 service station stores from Oel-Pool still requires the approval of the Competition Commission Weko.
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In 2016, the Swiss Federal Competition Commission Weko imposed the fine on Swisscom and Cinetrade - now Blue Entertainment - for abusing its dominant position in the live broadcasting of Swiss soccer and ice hockey matches on pay TV. Some competitors had been refused any offer by Swisscom to broadcast live sports on its platform, while others had only been granted a reduced sports offer. The ruling relates to the period from 2002 to 2012.
Swisscom and Blue Entertainment remain convinced that they acted lawfully in marketing sports content, Swisscom announced on Wednesday. The high investments made by Swisscom and Cinetrade between 2002 and 2012 would have justified a minimally expanded sports offering for distribution via the Swisscom TV platform. This was the only way the investments could have been sufficiently protected at the time.
According to the statement, the problem no longer exists. Currently, all TV customers receive all sports content from Swisscom and Sunrise UPC. Smaller TV providers would also benefit from this and could obtain sports content from the two large telecom groups.
Sunrise UPC is considering legal action
Swisscom is currently analyzing the ruling and is considering an appeal to the Federal Court. The fine will reportedly impact operating profit (EBITDA) in the second quarter. However, the targets for the full year remain unchanged, the industry leader said.
For its part, competitor Sunrise UPC is now considering a claim for damages under civil law: "We are analyzing the situation," said a spokeswoman in response to an inquiry from the AWP news agency. (SDA)
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In December 2020, the Swiss Federal Competition Commission (Comco) opened an investigation into Swisscom's fiber-optic strategy following initial clarifications and a complaint from a competitor.
At this stage, the Comco considers that by deviating from the standard agreed between the federal authorities and the operators, the company is engaging in an abusive practice within the meaning of the Cartel Act.
The Weko therefore ordered a precautionary measure prohibiting Swisscom from continuing the construction of its network without guaranteeing its competitors non-discriminatory access - so-called Layer 1 access. This measure was confirmed by the Federal Administrative Court at the end of September.
Operation not restricted
In an interim ruling published on Wednesday, the Federal Court rejected Swisscom's request for suspensive effect. It essentially states that the precautionary measure does not affect the operation of the existing network. Under these circumstances, the suspensive effect was not justified. This decision does not prejudge the outcome of the appeal against the precautionary measure itself.
The dispute between Swisscom and the other operators concerns the architecture of the fiber optic network. In the negotiations between the parties and the authorities between 2008 and 2012, a star-shaped structure (point-to-point architecture, P2P) with four fibers had been agreed, in which competitors could have one independent fiber.
In February 2020, Swisscom, which is solely responsible for the network rollout, presented its new strategy based on a so-called tree structure (Multipoint Architecture, or P2MP). (SDA)
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The investigation is expected to take around two years, the Weko announced on Tuesday. It said there were indications that Directories was hindering competitors and putting end customers at a disadvantage with the introduction of Swiss List products.
The investigation will now examine whether Swisscom Directories actually holds a dominant position and is abusing its position within the meaning of the Cartel Act.
Criticism of pricing policy
Directories is the publisher of the printed telephone directory and operator of the two online directory services local.ch and search.ch. In spring 2019, it launched the single product Swiss List.
With the introduction of Swiss List, Directories has fundamentally changed the price and conditions for the addition of the telephone directory entry, the Weko criticizes. Various products and services are now only offered in bundled form. According to an initial assessment, this could lead to a hindrance of competitors and to the disadvantage of the market opponent.
Swisscom Directories says it will examine the final report of the preliminary investigation in detail and submit its comments to the secretariat of the Competition Commission within the deadline. Until the investigation is completed, Swisscom Directories will not make any further statements, it says. (SDA)
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Swisscom intends to further expand its fiber-optic network and connect more than 1.5 million additional households and businesses with fiber. In areas that it is expanding on its own, it is changing the design of the network in such a way that competitors no longer have direct access to the network infrastructure. Swisscom is thus changing the existing market structure and presumably limiting the innovation and business opportunities of its competitors, the Weko said in a statement. End customers, for their part, could be restricted in their choice of providers and product diversity as a result.
Based on the information currently available, it appears credible to the Weko that Swisscom is abusing a dominant position with this behavior. The Commission is therefore immediately taking precautionary measures to prohibit the telecoms provider from denying competitors access to end-to-end lines when expanding the fiber-optic network.
According to its own statements, the Weko is now investigating in greater depth the extent to which Swisscom is abusing its dominant position by refusing network access.
The planned takeover aroused the interest of the Weko, which decided in June to examine the transaction in greater depth (Werbewoche.ch reported). Now this potential stumbling block has been removed. The Weko approves the takeover without conditions or requirements.
Sunrise sees this decision as confirmation of its own view that the transaction will give the company significant competitive advantages and make it an even stronger competitor. In addition to major cost savings, the transaction is expected to result in significant cross-selling potential, especially in the wholesale area. As a result, the transaction is also expected to create substantial value for its shareholders and secure Sunrise's long-term profitability.
"With the approval by the Weko, we have reached an important milestone on the way to New Sunrise. With the acquisition of UPC Switzerland by Sunrise, Switzerland gets the definitive challenger in the telecom market and a strong partner for business," says Olaf Swantee, CEO of Sunrise.
The regulatory hurdles for the closing of the transaction have thus been removed. The next step is now to pass a resolution on the required capital increase at the Annual General Meeting, which is expected to take place on October 23, 2019. However, various shareholders, including the largest Sunrise single shareholder Freenet, have spoken out against the UPC takeover (Werbewoche.ch reported). So not all hurdles have been cleared out of the way yet.
How the Handelszeitung writes in its current issue, Sunrise's main shareholder Freenet has once again spoken out against a reworking of the billion-dollar deal shortly before the Weko's decision. In addition, the German telecom provider says it no longer sees any industrial logic in the takeover of UPC.
Freenet CEO and Sunrise board member Christoph Vilanek on the announcement by Sunrise CEO Olaf Swantee to change the capital structure of the deal: "We are disappointed by the timid approach; this is not a commitment to a fundamental change in strategy, but merely a fig leaf. The approach shows how nervous management is in view of the extraordinary general meeting." A higher debt ratio of up to four times the Ebitda of UPC-Sunrise, as reported among institutional investors, is certainly in line with Freenet's original demand.
But the situation is no longer the same as when negotiations were formally concluded at the beginning of the year, says Vilanek: "The industrial logic for the UPC transaction no longer exists today. 5G is now a serious cable network replacement." At the time, he said, people simply underestimated the huge potential of fast mobile communications in indoor Internet use. "So Sunrise would be investing in an already obsolete technology if it took over UPC Switzerland." This would massively reduce the payback time of a planned ten years for the UPC network. "The deal is simply no longer profitable." (swi/pd)
In February 2019, it became known: Sunrise wants to take over UPC (Werbewoche.ch reported). The purchase price: 6.3 billion Swiss francs. The announced major merger aroused the interest of the Competition Commission (Comco), which decided in June to examine the takeover in greater depth. (Werbewoche.ch reported).
That this might not be the only stumbling block for the new telecom major was reported by the Handelszeitung as early as the beginning of July: the newspaper published that the purchase decision was made against the will of Sunrise's main owner Freenet (Werbewoche.ch reported). "On February 27, as Freenet's representative on the board of directors, I voted against the planned takeover," Freenet CEO Christoph Vilanek said at the time. The German telecom provider holds around a quarter of all Sunrise shares.
Now Vilanek is doubling down and mobilizing against the merger. The purchase price is too high and to the detriment of all Sunrise shareholders, the Freenet CEO told the AWP news agency on Friday. Therefore, Freenet will vote in the fall against the planned acquisition, respectively against the necessary capital increase of 4.1 billion to finance the purchase. Previously, it had been left open how it would vote, as Vilanek wanted to wait for UPC's half-year results first.
How the Switzerland at the weekend Freenet could thus derail the deal. Although the 24.5 percent shareholding is not enough to overturn the proposal, the Sunrise owner would have massive power in the vote, as never all shareholders would come to the general meeting. In other words, the actual quarter could quickly become half or more on the spot.
On Friday, Sunrise commented on the Freenet statement. In a statement, the company wrote that it had "taken note" of the announcement. "Sunrise remains convinced that the acquisition of UPC Switzerland will create a stronger and more valuable Sunrise that benefits from a compelling strategic rationale," it added. Otherwise, Sunrise was tight-lipped. It will provide information on the acquisition of UPC Switzerland when it publishes its figures for the second quarter of 2019.
Sunrise and UPC are two of the largest telecommunications providers in Switzerland. Historically, Sunrise is a mobile network operator and UPC is a cable network operator. With the acquisition of UPC, Sunrise is acquiring its own cable network. As a result, Sunrise intends to offer fixed-line, broadband Internet and mobile services as well as digital television on its own infrastructure in Switzerland. The acquisition is intended to achieve greater independence from Swisscom and realize revenue and cost synergies.
The preliminary investigation by the Competition Commission has shown that there are indications of a single market dominant position, according to a statement on Monday. This is the case in the markets for the provision of sports broadcasting rights in pay TV and in the markets for IP interconnection access to end customers of Sunrise and UPC. Furthermore, according to the Competition Commission, there are indications of the creation or strengthening of collective market dominance together with Swisscom on the retail markets for broadband Internet, the retail markets for fixed-line telephony, the platform markets for the transmission of linear digital TV and in the regional platform market (UPC's network) for the transmission of video on demand.
For these reasons, the Competition Commission is conducting an in-depth examination of how the planned merger would affect competition. The examination must be carried out within the statutory period of four months.