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Vodafone argues for rejection of take-over bid for PT

Lisbon, 23 August 2006 – On the basis of the potential undertakings mentioned in the questionnaire received from the Competition Authority (AdC), Vodafone Portugal is of the view that the measures presented are insufficient and unlikely to be effective in minimising the risks of distortion of competition arising from Sonaecom’s present take-over bid for PT. If this bid were allowed to proceed, apart from other aggravating factors, the market share in excess of 60% and the economic power that the new entity would enjoy in the mobile communications market and closely related markets would raise serious obstacles to competition in the Portuguese mobile communications market.

Vodafone Portugal continues to hold the view that, notwithstanding the possible application of “remedies”, authorisation of this bid as it stands carries a series of risks that cumulatively would mean the creation or reinforcement of heavily dominant positions in various markets, especially in the mobile communications market, which would result in significant obstacles to competition which, in turn, would have the effect of compromising quality levels and growth in the market, to the indisputable detriment of consumers.

It is estimated that the entity that would be most affected by this proposed operation would be the competing operator left in the market. The shift from a competitive scenario with 3 operators to one of heavy concentration in one operator and (possibly) two smaller scale operators competing with one another for the migration of customers in the absence of new customers of mobile services would clearly prejudice the latter while favouring the dominant operator.

One cannot see conceive how the artificial creation of marked imbalances of market share between one operator and the rest could result in benefits to the consumer. In fact, the mobile operator resulting from this bid, being part of a powerful commercial group, would enjoy a dominant position that was so strong and hegemonic (quite apart from being unique in European markets) that it would seriously prejudice competition in the mobile market and compromise present levels of accessibility, diversity, price and quality of services for most consumers.

This being so, Vodafone Portugal is of the view that none of the potential undertakings (or “remedies”) implicitly presented by the AdC – separately or cumulatively – is sufficient and likely to be effective in “maintaining effective competition” (Article 35/3 of the Competition Law), and that accordingly the present bid should not be approved.