Takeover of Esat by BT given go-ahead

The European Commission Competition Directorate last night confirmed that it had given conditional approval to the $2.5 billion (€2.58 billion) acquisition by British Telecom of the Irish telecoms company, Esat.

In the face of "serious concerns" about the competition effects on global tele communications services in Ireland, BT has given a number of undertakings to the Commission, which will loosen or break some distribution agreements with global service providers.

The Commission found that the effect of the merger on the UK/Ireland fixed telephony route and in the mobile phones market would be unproblematic as BT would simply reinforce its position in a market dominated by Eircom.

In the Internet access market, the Commission says it accepts that the acquisition should not lead to the creation of a dominant duopoly. "The Irish market is fast growing and characterised by fluctuating market share, rapid technological changes and new entry," the Commission said in a statement.

But the Commission says that it had "serious competition concerns" in relation to the distribution of global telecommunications products where the joint operation would have dominated the Irish market with a 50 to 60 per cent share.

"In particular, the combined entity would have distributed Global One's products, via Esat, on an exclusive basis. In addition, Esat would have kept distributing, on a non-exclusive basis, Infonet's products," the statement said.

In order to get around the problem, BT will either allow Global One - now owned by France Telecom - the right to end its distribution agreement with Esat or will itself renounce exclusive distribution rights to Global One's products. BT also agreed not to renew Infonet's distribution agreements, which are due to expire at the end of the year.