Completed acquisition by Macquarie Infrastructure Fund II and Macquarie Communications Infrastructure Group of Airwave Safety Communications Limited

Affected market: Terrestrial transmission services

No. ME/3019/07

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, third party comments, assessment and decision.

The OFT's decision on reference under section 22(1) given on 8 August 2007. Full text of decision published 15 August 2007.

Please note that square brackets indicate figures or text which have been deleted or replaced with a range by the OFT or at the request of the parties for reasons of commercial confidentiality or public interest.

PARTIES

Guardian Digital Communications Limited (Guardian) is a UK company ultimately controlled by MCG [see note 1] a Macquarie fund listed on the Australian Stock Exchange and MEIF II [see note 2], a Macquarie unlisted investment fund. MCG owns a 60.1 per cent stake in Macquarie UK Broadcast Holdings Limited which in turn wholly owns Arqiva Limited (Arqiva) and National Grid Wireless Group (NGW).  Arqiva and NGW are the only two companies in the Macquarie group portfolio of companies which are active in similar sectors to the acquired company in the United Kingdom (UK).

Airwave Safety Communications Limited [Endnote 1] (Airwave) provides communications networks and services to the emergency services and other public service users. Airwave owns the only private mobile radio (PMR) network in Great Britain that is based on nationwide digital terrestrial trunk radio (TETRA) technology. Its 2006 UK turnover was £234 million.

TRANSACTION

Guardian completed the acquisition of Airwave on 20 April 2007. The statutory deadline expires on 19 August 2007 and the administrative deadline expired on 11 July 2007.

JURISDICTION

As a result of this transaction, Guardian and Airwave have ceased to be distinct within the meaning of section 26(1) of the Act. The UK turnover of Airwave exceeded £70 million for the 2006 financial year. The turnover test pursuant to Section 23(1) (b) of the Enterprise Act 2002 (the Act) is therefore satisfied. The OFT believes therefore that a relevant merger situation under Section 23(1) of the Act has been created.

THIRD PARTY VIEWS

Third parties were generally unconcerned. The concerns some third parties raised have been addressed above.

OFCOM VIEWS

Ofcom suggested that the OFT should assess the impact of the merger with respect to any potential for the merged entity to tie or bundle services in such a way so as to foreclose competition in the downstream market for managed services and the impact of the merger with respect to mobile data services. These issues have been addressed above.

ASSESSMENT

The parties overlap in four mobile telecommunications activities: (i) network access; (ii) managed services; (iii) mobile data solutions; and (iv) site rental.

On network access, the parties are not close competitors. Airwave is unable to provide network access to 'other customers' and although Macquarie (Arqiva)  is yet to use its spectrum, the counterfactual is that it is most unlikely that it would have either the incentive or ability to provide PMR services to blue light customers or sharer organisations in a significant way. No horizontal issues arise as a result of the merger in regard to network access.

The merger does not give rise to horizontal concerns in regard to managed services or any competition concerns in regard to mobile data solutions. The evidence before the OFT shows that post-merger many alternative providers remain to provide sufficient competitive constraint in both segments on the merged entity (including the option of self-supply in managed services).

For site rental a number of third parties raised concerns about this merger given that it has taken place a few days after Macquarie UK Broadcast Ventures acquired NGW. However, based on the available evidence the OFT considers that Airwave and Macquarie / NGW are not particularly close competitors in regard to site access and therefore the merger does not lead to a substantial lessening of competition. In addition, the parties hold low shares of supply of sites and barriers to entry and expansion are also relatively low.

Since the merger does not create any market power in any market related to sites, or change the incentives of the parties in any market in which they are active, no vertical issues arise as a result of the merger with respect to site access.

Third party concerns were also raised in regard to the merger creating the ability and / or incentive for the merged entity to use its market power in the network access market to foreclose competitors in the downstream managed services market. Since the parties are not close competitors in network access services, therefore, the merger has not changed the parties' incentive or ability to tie or bundle downstream services (such as managed services) to the network access. Further, Airwave did not operate such a strategy before the merger even though it supplies network access services to almost all blue light customers and sharer organisations. Indeed, two of the largest managed service providers do not supply any network access.

DECISION

This merger will therefore not be referred to the Competition Commission under section 22(1) of the Act.

NOTES

1. Macquarie Communications Infrastructure Group.
2. Macquarie European Infrastructure Fund II.

ENDNOTE

1. Macquarie has told the OFT that since this merger was completed, the name of the company has changed to Airwave Solutions Limited

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