The Italian Competition Authority Authorizes the Acquisition of Two Data Center and Cloud Computing Services Companies
By Valerio Cosimo Romano
With the decision No. 46741, published on 2 October 2017, the Italian Competition Authority (“ICA”) authorized the acquisition of Infracom Italia S.p.A. (“Infracom”) and MC-Link S.p.A. (“MC-Link”) by F2i SGR S.p.A. (“F2i”).
F2i is an asset management company, owned by institutional investors, which controls two closed-end investment funds and mainly invests in Italian infrastructures. Infracom is a company which provides (i) data center and cloud computing services, which are part of the broader ICT market; (ii) telecommunication services, both wholesale and retail; and (iii) enterprise resource planning services. MC-Link is a publicly listed company which mainly offers data center services (inter alia housing, co-location and server renting).
The transaction was structured as follows: 2i Fiber, a newly incorporated company whose 80% of shares are owned by one of two of F2i’s funds, acquired the exclusive control of Infracom (and, consequently, indirect control of its subsidiaries Softher S.à.r.l. and Multilink Friuli S.r.l., and 89% of MC-Link), and of MC-Link.
The transaction involves the information and communications technology (“ICT”) sector. Coherently with the European Commission’s precedents, the Authority determined that the ICT services market shall be considered individually, without further segmentation. The market separation in smaller divisions, for example co-location provided by data centers, would be unjustified, given the differentiation within the ICT offer itself. Indeed, the ICT offer is usually tailored upon very specific needs of the market base and therefore may change and spread to other markets very easily. The ICA specified that even by ‘unbundling’ the relevant market in smaller segments, there would be no dominance by the new entity.
The ICA further added that, under a geographical point of view, data center and cloud computing services have specific economic characteristics confined to a local market, generally defined by a metropolitan city, given that the client base tends to demand these services within 50 kilometers from its activity. This is due to the fact customers need a signal latency not exceeding certain thresholds, and this is why companies operating in this sector tend to position their facilities in the proximity of urban areas.
According to the ICA, the transaction also involves marginal effects on two other markets: i) wholesale access to fixed public telephone network services; and ii) retail telecommunication on fixed network services, where Infracom owns marginal quotas. However, such markets are generally characterized by the presence of an incumbent operator (Telecom Italia S.p.A.) holding a preeminent position.
ICA concluded that the transaction will not have an impact on competition in the markets of telecommunications and ICT services, with reference to data center and cloud computing services. The Italian Authority for Communications Guarantees (AGCOM) concurred with ICA’s opinion. The transaction was therefore authorized.