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Telefonica and Portugal Telecom under EU investigation

Tue 1st Feb 2011

The European Commission has initiated an investigation into the activities between Spain' Telefónica S.A. and Portugal Telecom SGPS S.A. to ascertain if they have breached EU rules by forging an agreement not to compete with each other within their respective home markets. The between the two companies is investigated under Article 101 of the EU Treaty, which bans restrictive business practices.

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The deal was finalised at the end of last year when Telefónica full ownership of their Brazilian joint venture, Vivo. The Commission will also investigate whether the yet to be completed agreement was made before the Vivo deal, which is not concerned by the investigation.

The Commission has a copy of the agreement, complete with the 'non-compete clause', which runs from September 2010 to the end of 2011.

The scope and effects of the co-operation between the parties in Spain and Portugal prior to the 2010 Vivo transaction will also be investigated. Telefónica and Portugal Telecom concluded a co-operation agreement in 1997 concerning markets outside the EU, which the Commission was made aware of at the time. The Commission will look into whether the co-operation may have had an effect on the Spanish and Portuguese markets.