Anticipated acquisition by BT Group plc of PlusNet plc

Affected market: Telecommunications

No. ME/2755/07

Please note that the full text of the decision can be downloaded by using the link on the right. What follows are extracts regarding the parties, the transaction, jurisdiction, assessment and decision.

The OFT's decision on reference under section 33(1) given on 23 January 2007. Full text of decision published 31 January 2007.

PARTIES

BT Group plc (BT) is a listed holding company for an integrated group of businesses that provides global telecommunications services, including voice calls and internet access. It comprises four lines of business: BT Retail [note 1]; BT Wholesale [note 2]; BT Global Services [note 3]; and Openreach [note 4].

PlusNet plc (PlusNet) is a UK-based Internet Service Provider (ISP) that also provides voice call services. PlusNet's UK turnover for the year ended 31 December 2005 was £35.2 million.

TRANSACTION

BT proposes to acquire the entire share capital of PlusNet. The parties made a submission to the OFT on 1 December 2006. The OFT's administrative deadline is 31 January 2007.

JURISDICTION

As a result of this transaction BT and PlusNet will cease to be distinct. The share of supply test in section 23 of the Enterprise Act 2002 (the Act) is met in relation to the supply of retail fixed line rental in which BT currently has a share of supply of approximately 74 per cent and the merger would increase this by less than [redacted – 0-5] per cent. The OFT therefore believes that it is or may be the case that arrangements are in progress or in contemplation which, if carried into effect, will result in the creation of a relevant merger situation.

ASSESSMENT

The increment to BT's shares of supply resulting from the merger are very small at [redacted – 0-5] per cent, [redacted – 0-5] per cent and [redacted – 0-5] per cent in fixed line rental and voice calls, retail narrowband internet access and retail broadband internet access respectively. This has meant that it has not been necessary to conclude on precise market definitions and the OFT considers the appropriate frames of reference in this case to be fixed line rental and voice calls, retail broadband internet access and retail narrowband internet access. Based on these small increments and the presence of other suppliers in each of the sectors in which the parties activities overlap the OFT believes that this transaction does not give rise to any horizontal or vertical concerns.

There has been recent investment by third parties in retail broadband access services. Furthermore, the recent investment at the wholesale level and BT's WLR and CPS have facilitated entry into the retail supply of fixed lines and voice calls, and internet access markets. The emergence of new technologies (e.g. wireless, 3G mobile and LLU) has further lowered potential barriers to entry and also widened the field of viable competitors.

Consequently, the OFT does not believe that it is or may be the case that the merger may be expected to result in a substantial lessening of competition within a market or markets in the United Kingdom.

DECISION

This merger will therefore not be referred to the Competition Commission under section 33(1) of the Act.

NOTES

1. Serves business and residential customers and is the prime channel to market for other BT businesses.
2. Runs BT's networks and provides network services and solutions to other communication companies.
3. BT's global-managed services and solutions provider that serves multi-site organisations worldwide.
4. A new part of BT that has been created to own, maintain and develop the access network which links homes and businesses to the networks of Britain's communications providers.

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