Anticipated acquisition by BT Group plc of Wire One Holdings, Inc.

Affected market: Teleconferencing

No. ME/3628-08

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 views, assessment and decision.

The OFT's decision on reference under section 33(1) given on 21 May 2008. Full text of decision published 3 June 2008.

Please note that square brackets indicate figures or text which have been deleted or replaced at the request of the parties for reasons of commercial confidentiality.

PARTIES

BT Group plc (BT) is an international provider of telecommunications solutions and IT services in the UK, Europe and around the world. BT's principal activities include networked IT services, telecommunications services, broadband and internet products and services.

Wire One Holdings Inc (Wire One) is a provider of audio, web and video teleconferencing solutions. It supplies a range of teleconferencing solutions including design and consultancy, the supply of video conferencing equipment and various other conferencing services. In 2007, Wire One generated revenues of approximately £[ ] million in the UK.

TRANSACTION

On 8 April 2008, BT United States L.L.C., a wholly-owned subsidiary of BT, agreed to acquire the entire issued share capital of Wire One. The parties intend to close the transaction by [ ].

BT notified the transaction to the OFT by way of a Merger Notice on 21 April 2008. The OFT's extended statutory deadline to announce its decision is 4 June 2008.

The transaction has also been notified to the competition authorities in Germany and Italy.

The parties submit that the rational for the transaction is to enhance BT's offering of video conferencing solutions in the USA. Wire One generated approximately [ ] per cent of its 2007 worldwide revenue in the USA.

JURISDICTION

As a result of this transaction BT and Wire One will cease to be distinct.

The parties overlap in the supply of conferencing services, namely audio conferencing, video conferencing and web conferencing services. The parties submit that their share of supply of audio conferencing services in the UK is above 25 per cent. Therefore, the share of supply test in section 23 of the Enterprise Act 2002 (the Act) is met. 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.

THIRD PARTY VIEWS

The OFT received responses from 11 customers, none of which raised any concerns about the transaction. Amongst eight competitor respondents, four expressed some concerns. These related to the transaction strengthening BT's already strong position in the market and allowing BT to be present at all levels of the video conferencing services market. These concerns have been addressed in the OFT's analysis.

ASSESSMENT

The parties overlap in the provision of teleconferencing solutions. Teleconferencing is made up of audio, web and video conferencing. The OFT recently examined this sector in its decision on the West/Genesys transaction. Consistent with that case, the OFT has considered the impact of this transaction on the market for teleconferencing as a whole, as well as the individual segments for audio, web and video conferencing. Taking a cautious approach, the OFT has also examined the impact of the transaction on the provision of video conferencing equipment and video conferencing services separately. The parties have provided data on the basis of a UK national market and a wider EU market. Given the lack of competition concerns on even the narrow UK basis, the OFT has not considered it necessary to come to a conclusion on the precise scope of the product or geographic market in this case.

In relation to the teleconferencing market as a whole and the audio and web conferencing segments, the increment in market share resulting from the transaction is minimal. The OFT received evidence that the merged entity will continue to face strong competition from a significant number of competitors. On the basis of the evidence received in this case, as well as its knowledge of the market from its analysis in the West/Genesys transaction, the OFT is able to conclude that the transaction does not raise any competition concerns in relation to teleconferencing in general or audio and web conferencing in particular.

In relation to the provision of video conferencing solutions, the OFT took a cautious approach in considering the provision of video conferencing services separately from the provision of video conferencing equipment. In any event, the OFT did not receive any evidence to indicate that the transaction raised any competition concerns in relation to either video conferencing services or video conferencing equipment. The OFT saw robust evidence that the parties are not each other's closest competitors for the provision of video conferencing equipment and video conferencing services and was satisfied that customers would have a sufficient choice of providers post-transaction. Moreover, the OFT received evidence that customers could relatively easily and cheaply switch between competing suppliers in the event of an attempted price increase. No customers raised any concerns about the loss of choice of suppliers resulting from the transaction.

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.

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