Brussels, 16/07/2004 (Agence Europe) - The Commission's authorisation of a state guarantee for a multi-million euro loan to MobilCom AG comes with strings attached - a ban on direct online sales of MobilCom mobile telephony contracts for seven months.
The Commission approved aid granted to MobilCom AG to help with its restructuring in 2002. But the aid approval comes with tight strings attached. To offset the distortions of competition caused by the aid, MobilCom and its affiliates must halt their online direct sales of MobilCom mobile telephony contracts for seven months. The Commission held that competition was unfairly distorted primarily because MobilCom used the aid not only to restructure the company physically but also to reorient its marketing strategy and to focus on more profitable customer segments in its core business area as a mobile telephony/service provider. The aid thus had a particularly damaging effect on competitors as they too are having to target their business strategies at more profitable customer groups because the German mobile telephony market has reached saturation level. However, the aid granted meant that MobilCom did not have to bear alone the negative consequences of the risky strategy it had pursued of focussing on the UMTS market (from which it has now withdrawn), while at the same time being able to benefit from the positive effects, such as the fact that, in slimming down its customer portfolio, it could count on a larger customer base. This meant that the aid gave MobilCom a substantial advantage over its competitors. The Commission takes the view that imposing a ban on direct online sales of MobilCom mobile telephony contracts for seven months should offset the competitive distortions created. Halting such marketing for a while will offer competitors a chance that customers will go to their websites and sign up for contracts. Action to implement the measures must begin before 14 September 2004. Thursday's issue of the Wall Street Journal reports that MobilCom is planning to lodge an appeal at the European Court of Justice.