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PR(01)14: The EFTA Surveillance Authority decides to close its investigation against alleged aid to Iceland Post and Telecom Ltd. without further action

13.9.2002

The EFTA Surveillance Authority has closed an own initiative investigation of alleged aid to Iceland Post and Telecom Ltd.

In June 1999, the Authority opened an investigation, after learning through press articles that, according to the Icelandic Competition Council, Iceland Post and Telecom Ltd. had received State aid in the form of an undervaluation of assets transferred from the former Post and Telecom Administration to Iceland Post and Telecom Ltd.  Iceland Post and Telecom Ltd. was a newly established and wholly state owned company, which started its operations on 1 January 1997.  In addition, the Icelandic Competition Council considered a partial relief of debts of Iceland Post and Telecom Ltd. towards the Government Employees’ Pension Fund to constitute illegal State aid.  Iceland Post and Telecom Ltd. was with effect as of 1 January 1998 split into two separate companies, namely Iceland Telecom Ltd. and Iceland Post Ltd.

In January 2000, the Authority also received a complaint from a competitor alleging, in addition, that Iceland Post and Telecom Ltd. had received illegal State aid in the form of an exemption from stamp duty.

Against this background, the Icelandic Government set up a special working group of independent experts, in order to undertake a new value assessment.  This expert group presented its report on 8 April 2000 and concluded that the assets transferred from the former Post and Telecom Administration to Iceland Post and Telecom Ltd. had been undervalued by ISK 3.8 billion (approximately € 43 million).  (This estimated undervaluation was, according to the report, as a whole related to Iceland Telecom Ltd. and not to Iceland Post Ltd.)

The Icelandic Government followed up on these conclusions, in particular by requiring Iceland Telecom Ltd. to repay the amount of ISK 3.8 billion, plus interests as from 1 January 1997.

Concerning the allegation that Iceland Post and Telecom Ltd. had received illegal aid through a partial relief of pension fund obligations, the Authority found that the reduction of debts which resulted in a corresponding increase in equity, did not imply that any aid was granted as this transaction could not be deemed to deviate from normal investor behaviour in a market economy.

As regards the exemption from stamp duty, the Icelandic Government has amended the relevant legal act, by abolishing the exemption retroactively.  In this respect, the Authority has noted that the stamp duty has been repaid, with accrued interests.

Against this background, the Authority was satisfied that the Icelandic Government had adopted the necessary measures to retroactively abolish the effects of aid granted to Iceland Post and Telecom Ltd.  Consequently, the Authority has decided to close the case without further action.

For further information please contact Ms. Alexandra Antoniadis (tel.: 02 286 18 52) or Mr. Michel Sanchez Rydelski (tel.: 02.286.18. 34).

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