The Board of Directors (BD) of the Competition Superintendence (CS) issued a decision with respect to the review recourse, ratifying the structural remedy established on the acquisition authorization request between CLARO and DIGICEL. The CS reaffirmed that in order to authorize said acquisition CLARO must previously waive the rights over 20MHz of the radio-electric spectrum destined to mobile telephony that the company exploits.

1. Press Release C. 27-11
th
El Salvador, October 10 , 2011.
CS Confirms Structural Remedy Established on
Claro – Digicel Acquisition
The Board of Directors (BD) of the Competition Superintendence (CS) issued a decision
with respect to the review recourse, ratifying the structural remedy established on the
acquisition authorization request between CLARO and DIGICEL. The CS reaffirm
reaffirmed that
in order to authorize said acquisition CLARO must previously waive the rights over 20MHz
of the radio-electric spectrum destined to mobile telephony that the company exploits.
electric
The BD of the CS analyzed the review recourse filed by America Movil and
“If the economic AMOV IV, owners of the Claro trademark, requesting the CS to “authorize,
agents decide to without any remedies, the acquisition” to acquire 100% of DIGICEL´s shares.
comply with the prior
structural remedy, the Pursuant to the analysis, the BD of the CS dismissed the aforementioned
recourse, concluding that the companies´ arguments, centered almost
authorization shall be
exclusively on the structural remedy to waive the rights over 20MHZ of the
granted. If on the radio-electric
radio electric spectrum (prior to the CS´ authorization), were not able to
contrary, they decide counteract the BD´ technical, economic, and legal reasoning exposed in the
not to comply with it, contested resolution.
the authorization shall
be denied. This is Hence, the BD of the CS decided to reaffirm that in order to authorize said
their decision”, acquisition CLARO must previously comply with the structural remedy before
acqu
informed Francisco the General Superintendence of Electricity and Telecommunication, (in
Diaz Rodriguez, Spanish, Superintendencia General de Electricidad y Telecomunicaciones),
Telecomunicaciones
Chairman of the BD of hereinafter “SIGET”; that is to waive the rights over 20MHZ of the radio-
radio
electric spectrum destined to mobile telephony that the company exploits.
the CS.
The remedies to be complied with after the acquisition has been authorized
were also ratified.
Said waiver together with the recommendation to the SIGET (this sector´s regulator) to auction the waived
ecommendation
mobile telephony radio-electric spectrum amongst new operators is a structural remedy that pursues to
electric
minimize the negative impact that the above cited acquisition might have on competition, giving the
opportunity for the entry of a new operator which would eventually reduce the concentration levels, increase
the rivalry levels, and decrease the possibility of collusion in this market.
,
The contestants expresses that the prior structural remedy was an “imposition”. Notwithstanding said
“imposition”.
allegation, the BD clarified that the decision to waive or not the rights over 20MHZ of the radio-electric
radio
spectrum destined to mobile telephony is a free act which only the petitioners can make willfully.
Consequently, if the economic agents, pursuant to their convenience, decide to waive the rights over said part
the spectrum, the authorization shall be granted. If on the contrary, they decide not to waive those rights, their
legal status shall not change, and the authorization shall be denied.
auth
In conclusion, the acceptance and compliance with the prior remedy or its not compliance is a
convenience decision, a cost-benefit calculation which only the petitioners can make. The BD of the
benefit
CS has no power to coerce said economic agents to decide one way or the other.
Edificio Madreselva, 1er Nivel, Calzada El Almendro y 1ª Ave. El Espino, Urb. Madreselva, Antiguo Cuscatlán, El Salvador.
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2. The CS´ highest authority deeply and cautiously analyzed each and every one of the allegations contained in
all
the review recourse filed, which were centered almost exclusively on the structural remedy (prior to the CS´
authorization), and were responded each and all of them with technical, economic, and legal justifications.
Some of the most relevant are set forth herein.
Reason for the remedy
For instance, the BD reiterated that the criterion used by the CS to establish the remedy prior to the
authorization of the acquisition was not the potential creation of a dominant economic agent, but the significant
reduction of the market´s rivalry due to the potential disappearance of an economic agent (DIGICEL), which
strongly impulses competition in the defined relevant market and the increase of collusion probabilities in it.
Waiver versus “expropriation”
The CS also clarified that due to its nature, the goods part of a concession cannot be expropriated. The
subsidiary of America Movil and AMOV IV in El Salvador is merely a concessionary of the right to exploit part
ri
of the radio-electric spectrum. Said subsidiary does not own the aforementioned right or part of the cited
.
spectrum. The radio-electric spectrum belongs to the Republic of El Salvador. The administrative concession
electric
does not create property rights in favor of the concessionary.
t
About the amount of 20 MHz
The BD of the CS explained that the portion of the radio-electric spectrum that CLARO should waive to in case
it decides to continue with the acquisition, derives, amongst other aspects, from the technical opinion received
o
from the regulator SIGET, who informed that with 20 MHz “…in El Salvador, it is technically feasible for a new
operator to participate in the telecommunications sector covering mobile telephony activities”. From said
activities
opinion it is obvious to infer that 20MHz is the necessary amount of the radio-electric spectrum for a new
electric
operator to enter and compete in the relevant market. It is important to clarify that currently the available
radio-electric spectrum for mobile telephony is scarce; hence, a new competitor cannot enter into the market
and generate competition and rivalry.
About the alleged gratuity of the waiver
On the other hand, with respect to the allegation of the “gratuity of the waiver”, the BD of the CS explained to
B
the contestants that the Salvadoran telecommunications regulatory legal framework foresees a compecompensation
for anyone who waives the right to the use of the concessioned radio-electric spectrum. An example of said
radio electric
case scenario is set forth in Article 99 of the Salvadoran Telecommunications Law stating: “Any owner of a
concession may request to renew in advance its exploitation right which implies the waiver of the
concession…The concessionary who has requested the renewal in advance of its exploitation right shall
e
receive an amount proportional to the value resulting from the auction, using as basis for the calculation of
said amount, the time pending for the concession to expire”.
Nonetheless, it is the SIGET´s obligation to determine the relevant pursuant to the telecommunications
regulatory framework. This is a typical case of legal regulations integration.
Consequently, the alleged gratuity of the waiver vanishes.
About freezing DIGICEL´s operation
In the review recourse, the contestants alleged that the remedies established by the BD “forced them to freeze
the commercial operation of DIGICEL, as currently stated, during five years, which means that during said
Edificio Madreselva, 1er Nivel, Calzada El Almendro y 1ª Ave. El Espino, Urb. Madreselva, Antiguo Cuscatlán, El Salvador.
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3. period CLARO would not be able to make decisions regarding the management of the acquired business or
integrate it with CLARO´s business”.
The BD of the CS clarified that the resolution issued literally reads: “Maintain during five years from the next
day the acquisition is completed, all the commercialization strategies carried out by DIGICEL, S. A. de C. V.
the
The strategies stated in the certified documents mentioned in the previous letter f), as well as the principles
under which those strategies were developed, will be used for said purpos
purposes”.
Therefore it should be understood that the condition to maintain, sustain, and continue with the
commercialization strategies carried out by DIGICEL, S. A. de C. V. seeks that the quality of the mobile and
land telephony services that DIGICEL´s, America Movil´s, and AMOV IV´s customers currently receive does
DIGICEL´s
not decrease, deteriorate, or disappear. But the aforementioned remedy does not keep CLARO from
increasing consumer welfare. On the contrary, said remedy pursues, at least, that CLARO cont continues to
exercise DIGICEL´s commercial behavioral principles and philosophy as: innovator, constant competition
promoter with its unpredictable commercial practices and sales, pioneer of the implantation of aggressive
commercial policies that impact significantly on the market´s competition, etc.
signif
Finally, it is important to point out that pursuant to its legal framework, the CS is the only authority in El
Salvador legally empowered to decide, based on a technical, economic, legal analysis, whether a merger or
acquisition “will provoke a significant limitation to competition”, (Article 34 of the Salvadoran Competition Law).
competition”,
Ergo, the decisions that the CS issues are based on a competition analysis that complies with the
requirements set forth in the Competition Law and not in sector regulations, since, that this must be
emphasized, the SC in the only authority to decide in competition matters.
You may consult the contested resolution in the following link: http://www.sc.gob.sv/uploads/SC
http://www.sc.gob.sv/uploads/SC-016-S-C-R-
2011_300811_1330.pdf; and, the resolution that dismisses the review recourse filed by CLARO in:
;
http://www.sc.gob.sv/pages.php?Id=1103.
http://www.sc.gob.sv/pages.php?Id=1103
Background
Date Stages of the analysis process of the acquisition request
June 6th, 2011 CLARO filed the authorization request to acquire DIGICEL´s shares.
shares
th
June 14 , 2011 The BD of the CS admitted the request for analysis.
st
June 21 , 2011 The BD of the CS requested from economic agents that operate in this
market, regulators, and other governmental institutions information needed
for the analysis of the aforementioned acquisition request.
th
August 30 , 2011 The BD of the CS established a prior structural remedy in order to authorize
the acquisition.
th
September 9 , 2011 CLARO filed a review recourse requesting the acquisition to be authorized
without any prior structural remedy.
th
September 26 , 2011 The BD of the CS admitted the review recourse.
th
October 6 , 2011 The BD of the CS ratified its decision to establish ex ante and ex post
remedies on the CLARO
CLARO-DIGICEL acquisition,
Edificio Madreselva, 1er Nivel, Calzada El Almendro y 1ª Ave. El Espino, Urb. Madreselva, Antiguo Cuscatlán, El Salvador.
E-mail: contacto@sc.gob.sv - www.sc.gob.sv