Last August, PPF Group agreed to divest a stake of 50% plus one share in its telecoms assets in Bulgaria, Hungary, Serbia and Slovakia to Emirates Telecom, also known as e&, for up to 2.5 billion euro ($2.7 billion), including earnout.
The investigation of the acquisition is part of the Commission's Foreign Subsidies Regulation, which allows the watchdog to address unfair foreign state support to companies.
The Commission has preliminary concerns that e& may have received foreign subsidies from the UAE that could distort the EU internal market, it said in a statement on Monday. The alleged subsidies include an unlimited guarantee from the Middle Eastern country and a loan from UAE-controlled banks that directly facilitated the deal.
Such subsidies may have improved e&'s ability to acquire the assets and strengthened the merged company's competitive position within the EU by allowing it to finance its activities at preferential terms.
The Commission will evaluate whether the foreign subsidies lead to actual or potential negative effects on the acquisition process, particularly if they allowed e& to deter or outbid other potential buyers or by enabling the company to make the acquisition in the first place. The Commission will also look into whether the subsidies negatively impact the internal market in terms of the merged company's activities.
At the end of its investigation, the Commission may accept commitments proposed by the company to address any distortions, prohibit the merger or issue a no-objection decision. The Commission has 90 working days to reach a decision, until October 15.
The new foreign-subsidy rules, which came into effect last July, allow the Commission to address market distortions caused by foreign subsidies, ensuring a level playing field for all companies operating in the internal market while remaining open to trade and investment.
According to the regulation, companies must notify the Commission of concentrations when at least one of the merging companies is founded in the EU with an EU turnover of at least 500 million euro and when the parties have received at least 50 million euro in combined foreign financial contributions from third countries in the three years before the concentration.
PPF Group, founded in 1991 in the Czech Republic, operates mobile operator Yettel and telecoms infrastructure provider Cetin in Bulgaria, Serbia and Hungary, along with O2 in Slovakia. In total, PPF serves over 10 million customers in the sector. The vendor's telecoms assets in the Czech Republic, including O2 and Cetin, were not part of the transaction.
