Montenegrin Agency conditionally approves Telemach’s acquisition of M-Kabl

On 29 December 2015, the Montenegrin Agency for Protection of Competition (“Agency“) issued its first conditional approval of a concentration, this time between Telemach A.D. Podgorica (“Telemach“) and M-Kabl doo Podgorica (“M-Kabl“). The concentration is a result of an indirect acquisition of full control over M-kabl by KKR & Co. L.P, registered in United States, through its subsidiary United Group B.V, registered in the Netherlands and its Montenegrin subsidiary Telemach. Both Telemach and M-Kabl are active on the relevant markets of distribution of media contents and provision of direct Internet access services in Montenegro. The preliminary assessment conducted by the Agency raised concerns about the effect of the concentration on these two relevant markets, as well as on the related markets, provoking the Agency to initiate phase II proceedings to investigate whether the concentration satisfies legal conditions for approval.


According to information provided by the Agency in its Conclusion initiating phase II investigation dated 24 September 2015, Telemach notified the concentration announcing its intention to acquire 100% of M-Kabl’s shares. It stated in the notification that both participants in the concentration are active on two relevant markets in Montenegro: market for distribution of media content and market for provision of direct Internet access services. In its reasoning as to why the proposed concentration satisfied the legal conditions for approval, Telemach described the overall telecommunications market in Montenegro, including the markets of distribution of media content and direct Internet access services, as dynamic, volatile and competitive.

On the basis of the notification, the Agency concluded that participants in the concentration are actual competitors on the territory of at least seven municipalities in Montenegro. In order to measure the level of concentration on the relevant market(s), the Agency conducted a market concentration test through calculation of the HHI index (Herfindahl-Hirschman Index) (the decision does not specify whether each of the relevant markets was tested separately, or they were tested as a single market). For the benefit of our readers who are beginners in the competition law, when assessed through HHI, the closer a market is to being a monopoly, the higher the market’s concentration and the HHI. And vice versa, the closer the market is to being perfectly competitive, the closer the HHI is to zero. The resulting pre-merger HHI of 3893 in this case showed that the relevant market was already highly concentrated. With the post-merger HHI of 4250, i.e. an incremental increase of over 350 points, the market would become significantly more concentrated as a result of the Telemch/M-Kabl merger. By way of an illustration, in its Merger Notice, the EU Commission provides for a safe harbour (where the Commission is unlikely to investigate, unless other factors are present which may raise competition concerns) for concentrations where a post-merger HHI is below 1000. The Commission is also unlikely to identify horizontal competition concerns in a merger with a post-merger HHI between 1000 and 2000 where the merger-induced change in HHI below 250, or in a merger with a post-merger HHI above 2000 where the incremental increase in HHI is below 150.


After conducting the phase II investigation for slightly over three months (the deadline for the Agency’s decision in case of conditional approval is 125 business days), the Agency issued a decision subjecting the approval of the concentration to the following behavioural measures:

(i) within 45 days from the implementation of the concentration, Telemach and its related undertakings (“KKR&Co. L.P. group“) shall make a binding offer to all existing cable operators in Montenegro to enter into distribution contracts for the content owned by the members of the group or for which the members of the group have exclusive rights on the Montenegrin territory, on commercial terms no less favourable than those provided to M-Kabl or any other earlier buyer of the content in question;

(ii) within further 45 days, i.e. 90 days from the implementation of the concentration, KKR & Co. L.P. group shall conclude distribution contracts with the undertakings which will have accepted the offer referred to above and shall submit to the Agency a notarised copy of each such contract within 3 days from its conclusion.

The decision also obliges KKR&Co. L.P. group to offer the competitors any “additional” content. This presumably means content the group will acquire rights to in the future. However, the holding in this part is confusingly worded, so the extent of this future obligation remains unclear.


With this decision, Montenegrin Agency is showing its increased capacities to scrutinize deals in complex markets such as telecommunications. Being the candidate country well into accession negotiations with EU, Montenegro has harmonised its legislation in the area of competition with the relevant acquis communitaire, and now endeavours to bring its competition enforcement to an appropriate level.

Unfortunately, however, the Agency only publishes the operative parts of its decisions, depriving legal community and others interested in competition law enforcement of the opportunity to get to know the reasoning behind the authority’s decisions. It is to be hoped that Montenegro will align with EU practices in this respect as well.