Syniverse/BSG (European Commission, phase II)
Advisory Services
The Situation
In 2007, the US technology group Syniverse agreed to acquire the wireless business of its competitor, the BSG Group, a company with global activities in a range of wireless and wireline communication services. Although the proposed transaction did not initially have a Community dimension by virtue of the turnover of the undertakings concerned, the proposed operation was reviewable under the national merger control laws of five Member States, namely Germany, Greece, Spain, Portugal, and Slovenia, and following the submission of a reasoned submission (Form RS) the case was referred to the European Commission.
Following an initial investigation, the Commission opened an in-depth phase II review. The Commission's initial market investigation had raised serious doubts, given that the transaction amounted to a 3-2 merger in the European market for GSM roaming data clearing services. These services act as clearing houses between mobile network operators (MNOs), allowing billing for and therefore facilitating roaming by end users. In this market, Syniverse and the BSG Group's wireless business are among the leading companies in Europe and worldwide, and are direct competitors in Europe.
In its in-depth phase II investigation, the Commission examined whether the proposed merger and the subsequent concentration in this market would be likely to lead to higher prices and lower quality for data clearing services.
NERA's Role
NERA was jointly instructed by the merging parties at the beginning of phase II, and worked with their legal advisors Kirkland & Ellis and Howrey (both for Syniverse) and Reed Smith (for BSG).
NERA provided economic analysis of a wide range of complex economic issues that arose in the course of the inquiry. In particular, NERA developed an analysis of the nature of the tendering processes, which customers predominantly use for procuring these services. NERA also provided a detailed empirical bidding study of actual tender data involving opportunities in which either party had participated, performed an assessment of the likelihood of entry, and investigated the strength and role of buyer power.
The Result
In its final decision, the Commission cleared the merger unconditionally.
The Commission's in-depth investigation concluded that Syniverse had not exerted strong competitive pressure on BSG's prices and that switching between BSG and Syniverse had been very rare. Further, the Commission found that both BSG and Syniverse have faced strong competition from the market leader Mach. It therefore concluded that the combined Syniverse/BSG would remain in strong competition with Mach in the future.
Furthermore, other data clearing companies not yet active in Europe, such as the US company VeriSign, would have the possibility to provide such services to European MNOs as there are no capacity constraints and several MNOs clearly consider them as credible bidders. In addition, up-coming technological developments and innovation may give other players, in particular providers of software for the billing of roaming services, the ability and incentive to enter the market for data clearing services.
The Commission's market investigation also showed that MNOs would remain sufficiently strong to exclude the likelihood of unilateral price increases by the merged entity, in particular by sponsoring the entry of new competitors.
