Vodafone Spain has been surprised and displeased to receive the Statement of Facts in which the Investigation Department of the National Competition Commission concludes “that Movistar, Orange and Vodafone incurred in a concerted practice prohibited by section 1 of Act 157/2007, that consisted in the announcement by Movistar of the new rates that it would apply from 1st March 2007, sufficiently in advance to allow Orange and Vodafone to imitate them, with the sole possible objective of that being so, and in the imitation, first by Orange and then by Vodafone, of the new rates of Movistar”.

BACKGROUND
At the end of 2007, Spain’s three main mobile telephone operators announced that they would be modifying their rates after 1st March 2007 to adapt to the provisions in the so-called “Price Rounding Act”.

Vodafone changed its rates so there would be a neutral effect on the cost of customer calls. In fact, the Telecommunications Market Commission prepared a report to check the effect that this change had had on the cost of the service to customers and concluded that, in line with its estimate, the new Vodafone rate structure resulted in a 1% price reduction for contract customers.

On 9th October 2007, the Directorate General of Competition agreed to commence disciplinary proceedings against the three operators for “having found evidence of the possible perpetration by them of practices prohibited under section 1 of the Competition Act 15/2007”.

At that moment Vodafone declared that the commencement of such proceedings had no justification at all, that the rate changes made by the three operators at the time were in line with different individual strategies and did not form part of a joint agreement in any way whatsoever.

Yesterday, on 2nd July, Vodafone Spain received the Statement of Facts in which the Investigation Department of the National Competition Commission communicated its decision on these proceedings. The Statement of Facts concluded that Movistar, Orange and Vodafone engaged in a concerted practice prohibited under section 1 of Act 15/2007.

VODAFONE’S POSITION
Vodafone Spain wishes to emphatically express that such a conclusion is false, that it has not engaged in any type of illegal practice and has never coordinated its behaviour with its competitors for anti-competitive purposes. For this reason, Vodafone Spain announces that it will file pleadings against the Statement of Facts, trusting that its reasons and arguments will ultimately prevail.

Vodafone's radical disagreement with the Statement of Facts is based on the fact that the Investigation Department of the National Competition Commission:

I.- Makes serious mistakes when assessing the facts: repeatedly confuses a part (call set up charge) with the whole (which is the total price of a call). The call set-up charge is just one of the rate structure elements, the other main component is the price per second in which there is a broad range of variation between the different operators. In fact, as mentioned above, the Telecommunications Market Commission concluded in a report published after the rate changes that the three operators had taken different approaches. For example, in Vodafone's case, prices were reduced by 1%, in contrast to the rises of 1.8% and 2.6% in Telefónica and Orange respectively. It should also be remembered that Vodafone Spain had two call set-up charges: 12 euro cents (Vitamina Clásica) and 15 euro cents (for the rest)

II.- Omits relevant facts: such as the fact that the companies’ communication in a short period of time was determined by the observance of different legal regulations. The operators had very little time to act, since the rates had to come into effect on 1st March, the contractual conditions had to be communicated with a least 1 month’s notice and it was also necessary to previously inform customers through their usual communication cycles. Consequently, it was necessary for the operator to establish their new rates during the last third of January.

III.- European and Spanish jurisprudence on concerted practice determines that this can only be presumed when there is no other reasonable alternative explanation for the behaviour in question.

IV.- Includes considerations on the mobile telephony market which are distorted and outside the scope of the disciplinary proceedings: the Statement of Facts ignores the high level of competition of the Spanish market (it is the European market with the highest number of customers that change company maintaining their number and has one of the most advanced supplies of mobile telephony equipment in Europe thanks to the terminal subsidy policy).

Vodafone Spain regrets the decision taken by the Investigation Department to continue with the disciplinary proceedings, since the mere formulation of the Statement of Facts seriously questions the company's business practices and hopes that the final decision of the proceedings, after understanding its arguments, reverses the situation and is favourable to it.