Dutch Govt Presents Bill To Protect Against Unwanted Telecom Acquisitions

Dutch telecom secretary Mona Keijzer has presented a bill to Parliament, calling for the government to have more power over sensitive telecom acquisitions. Specifically, if the bill passes, acquisitions in the telecom sector could be halted or reversed if they are found to jeopardize national security or the public order.

The bill comes after the failed takeover attempt of KPN by Mexico’s America Movil in 2013. At the time, Parliament immediately called for measures. The Ministry of Economic Affairs announced in April 2018 that it was working on a bill against the foreign acquisitions of vital firms in the telecom and ICT sector. Since then, there have been new takeover rumours around KPN.

The government had the main lines of the current bill ready in mid-2014. The bill was then delayed in November 2014, with the then Minister of Economic Affairs Henk Kamp saying the proposal would be consulted only in 2017. The government has now obtained an opinion from the Council of State and sent the draft legislation to parliament.

Unwanted acquisitions

Examples of undesirable takeovers, according to the current proposal from the ministry, are those that could threaten continuity of service or which could present a danger of service failures. Keijzer said that “internet, data traffic and telephony can now be seen as a basic need. If these facilities fail on a large scale or become unreliable, this will lead to social unrest and economic damage.”

The government wants to prevent national security from being harmed by unreliable, non-transparent or criminal companies. “That’s why I protect this vital sector from unwanted control, by introducing a duty to report and the possibility of blocking acquisitions,” Keijzer said.

The duty to report means that companies acquiring “predominant control” of Dutch telecom facilities and the ability to disrupt services must report the acquisition to the ministry in advance. Control is expected to be considered at least 30 percent of the voting rights, alone or in concert with other shareholders, or the ability to name over half of the board members. In order to provide clarity for investors, objectively measurable criteria must still be established to determine when an offer can be considered to result in “relevant influence in the telecommunication sector”, i.e. the ability to disrupt or abuse services.

In the bill, the telecom sector is defined more broadly than providers of mobile, fixed telephony and internet services. Companies that provide vital facilities such as internet nodes, data centres, hosting and certification services are also included, because they are important for the continuity, reliability and safety of services and infrastructure in the Netherlands.

Under EU law, state intervention in takeovers is only permitted for reasons of overriding public interest, for example if national security or public order is at stake. The EU has just passed a new regulation that would allow increased scrutiny of acquisitions by foreign firms of European companies in vital sectors, such as infrastructure and technology. ―Telecompaper

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