European Commission Opens Probe on Acquisition of Alcatel Alenia Space and Telespazio by Thales

BRUSSELS, Dec. 1, 2006/Satnews Daily/ ― The European Commission has announced the opening this week of an in-depth investigation into acquisition by Thalès of France of Alcatel's shareholdings in the two space joint ventures -- Alcatel Alenia Space (AAS) of France and Telespazio of Italy, currently jointly controlled by Alcatel and Finmeccanica.

EC said the detailed investigation is in compliance with the European Union Merger Regulation.

In its initial market investigation, EC said it found that the proposed transaction gives rise to competition concerns because of the combination of Thalès's dominant position for Travelling Wave Tubes (TWTs), a critical component for telecommunications satellites, and AAS's activities as a manufacturer of satellite subsystems and components, and as a satellite prime contractor.

But EC said a decision to open an in-depth inquiry does not prejudge the final result of the investigation. The Commission will have 90 working days or until April 17, 2007 to take a final decision on whether the concentration would significantly impede effective competition within the European Economic Area (EEA) or a significant part of it.

EC Competition Commissioner Neelie Kroes said, “Space is a key sector for the European high-tech industry. The impact of this major restructuring needs to be carefully assessed to ensure that competition is preserved.”

Thalès is active in the development and integration of critical information systems for the defence, aeronautics and transport industries and for civil security. Thalès is jointly controlled by the French State and Alcatel.

Finmeccanica is a diversified engineering group active in aerospace, defence systems, energy, communications, transportation and automation. AAS, on the other hand, is active in the manufacture of ground and space systems, including satellites and subsystems and equipment for satellites.

Telespazio provides services and end-user applications using or related to satellite-based solutions and products.

Through the proposed transaction, Thalès will acquire Alcatel's 67 percent shareholding in AAS and its 33 percent shareholding in Telespazio.

EC noted that while Thales is not active in satellite prime-manufacturing, it is the leading producer of TWTs, an electronic component used to amplify microwave signals received by the satellite before retransmission to earth. TWTs and TWT-based subsystems are a critical component of telecommunications (commercial or military) satellites, and account for up to 20 percent of their total cost, EC said.

EC said Thalès holds a dominant position for TWTs, with US company L3 being the only other TWT supplier in the world. Thalès is the sole source of TWTs for certain frequencies or for satellites sold to countries affected by US export restrictions.

The Commission’s initial investigation indicated that the combination of Thalès' activities in TWTs and AAS' activities as manufacturer of other satellite components that are further integrated with TWTs, TWT-based subsystems, and satellites, may lead to competition problems.