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PR(05)15: EFTA Surveillance Authority opens the formal investigation procedure regarding State aid for the Icelandic submarine cable project (Farice)

27.5.2005

Yesterday the EFTA Surveillance Authority opened a formal investigation procedure against two support measures granted by the Icelandic State in favour of the so-called Farice project. The Farice project concerns the construction and management of a submarine cable which connects Iceland and the Faeroe Islands with Scotland and provides a telecommunications link between these countries and Europe.

The Authority has doubts about the compatibility of the two aid measures with the functioning of the EEA Agreement for two reasons:

  • The Authority considers that a State guarantee, which led to better financing conditions for a loan given to Farice hf., may result in a distortion of competition.
  • The Authority doubts whether a share capital increase by the Icelandic State was carried out under conditions under which a private market investor would have agreed to such an increase.

The Icelandic State notified the Authority in February 2004 of its support of the Farice project firstly in the form of a guarantee for a loan, which Farice hf. took up for the project’s financing. The State also participates as a shareholder in Farice hf., which consists of the Icelandic telecom operator Síminn, the Icelandic State, Og Vodafone, the Faeroe telecom incumbent Føroya Tele and some other minority shareholders.

In January 2003, when the share capital of the company was increased, the Icelandic State also increased its participation. This share capital increase is also investigated by the Authority.

During the formal investigation procedure the Authority will investigate whether the two measures, which it preliminarily qualifies as State aid, can be justified according to the State aid provisions of the EEA Agreement. In this respect the Authority will take note of the acclaimed necessity of the project in order to guarantee a reliable connection of Iceland, which cannot be ensured by the technically more limited current cable CANTAT-3. The Authority will further examine whether the project ensures that the access to all connectivity to Iceland is ensured on an open, transparent and non-discriminatory basis. The Authority may conclude that the aid measures would be compatible with the EEA Agreement if they were necessary and proportionate and would fulfil the requirements for being exempted from the general prohibition on State aid.

For further information, please contact Mr. Amund Utne, Director, Competition and State Aid Directorate, tel. (+32)(0)2 286 18 51 or Ms. Annette Kliemann, Senior Officer, Competition and State Aid Directorate, tel. (+32) (0)2 286 18 80.

 




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