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Vodafone opposes concentration in the mobile sector

Lisbon, 20 March 2006 – In a document delivered today to the Competition Authority, Vodafone Portugal claims that Sonaecom’s takeover bid for Portugal Telecom could create or reinforce a dominant position which could lead to significant barriers to competition in the mobile communications market, and should therefore not be authorised as proposed and an in-depth investigation should be launched.

Vodafone recognises as positive, in general terms, the emergence of this type of takeover or merger in the electronic communications markets. To the extent that they make companies and the sector more dynamic, these operations can benefit the market, provided that they safeguard the conditions for healthy competition and protect the interests of consumers.

On the basis of the available information however, the present operation carries a number of risks which, cumulatively, could lead to the creation of dominant positions in several markets.

This is especially true on the mobile communications market where the consequence could be the emergence of significant barriers to competition and disadvantages to consumers.

Vodafone Portugal considers that the possible “gains” for consumers of fixed telecommunications resulting from the takeover bid, which deserve to be pursued in any case, should not be obtained at the cost of losses arising from the distortion of competition in the mobile communications market. Those advantages, as announced by Sonaecom, arise from the separation of fixed networks and not from the intended concentration in the mobile communications market, and no logic of offsets should be applied here.

The combined market shares of TMN and OPTIMUS, levered in a group effect, both in terms of mobile and possible integrated offers, could lead to an increasingly dominant position for the company resulting from the merger, with major risks to competition and consumers.

In addition, the degree of concentration would be aggravated by the reinforcement of the position in multimedia content and by the fact the PT Group also enjoys market dominance in all electronic communications markets.

That apart, the new company resulting from the proposed operation would be part of a Group that has a strong position in the general retail distribution market in Portugal, which increases the risk of restricting access to important distribution channels in the electronic communications market. In addition, a new Group of such scale would benefit from strong negotiating power with partners and suppliers which would prejudice fair and balanced competition in this market.

Finally, due to the restrictions on access to relevant information and the very short time available for submitting views, Vodafone Portugal reserves the right to submit additional comments throughout the process of examination by the Competition Authority.