ENEL-FRANCE TELECOM/INFOSTRADA-WIND
PRESS RELEASE
PRESS RELEASE
An investigation has opened into the acquisition by Enel of Infostrada
At its meeting on 25 January 2001, the Competition Authority resolved to commence investigations into the Enel, France Telecom (FT), Wind and Infostrada companies, deeming the acquisition of Infostrada by Enel and FT likely to strengthen Enel's dominant position, and to substantially hamper competition on the Italian market for the supply (delivery and sale) of electric power to actual and potential "eligible" customers.
By "eligible" customers is meant customers who can resort to the deregulated market for their electricity supply. 'Potential' eligible customers are those who, while being entitled to do so, have not taken up this possibility and those who will eventually do so.
According to the European Commission the electricity supply to eligible customers must still be deemed to be limited to the national dimension. Crossborder-traded electricity as a proportion of the total electricity consumed in Italy is still wholly marginal, accounting for about 16% of total national consumption in 1999. About one-half of the capacity connected to foreign networks is also governed by long-term contracts concluded by Enel. Furthermore, the 1999 pre-tax price levels for whole of the Italian domestic industrial electricity consumption of between 2 and 70GW/hours expressed as lire/kwh at current exchange rates were between a minimum of 10.6% and a maximum of 64.3% than the European average.
Enel's share of all electricity consumption by eligible customers, whether actual or potential, was estimated in 2000 to be around 60%, and accounted for 87.4%. for total produced and imported energy. It may be inferred from these figures that at the present time Enel occupies a dominant position on the deregulated electricity market for the supply of electric power to actual and potential eligible customers.
The new structure of the Enel group following the acquisition of Infostrada would enable Enel to offer a range of utilities (electricity, telecommunications, gas, water) to a huge large number of telecommunications customers supplied by the group. (The group has 6.1 million lines connected by Infostrada and 6.4 million lines connected by Wind). This enables the group to make a whole series of economies in a miscellaneous range of networked services (in terms of lower management costs etc), as well as a series of economies of scale. Capturing a substantial share of these customers would de facto limit the impact of the deregulation of the electricity market.
Thanks to the acquisition of Infostrada, Enel can now offer eligible customers a range of utilities, which could delay the market entry of any real competitors against Enel on the market for the supply of electric power to eligible customers.
This conclusion becomes all the more relevant when considering the increase in the entry cost to these markets by any potential competitor who would have to compete against joint offering of at least two utilities instead of only having to compete on the market for the supply of electricity.
The investigation began as a result of a referral on 20 December 2000 to the European Commission which was accepted on 19 January 2001. In its submission to the Commission, the Competition Authority identified possible obstacles to competition on the electricity supply market, but excluded any anti-competitive effects on the telecommunications market. The analysis of this case that has already been made for the purposes of the referral to the Commission will shorten the preliminary investigation period. The whole procedure is expected to be completed at the latest within 45 days.
Rome, 26 January 2001