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PR(06)37: The EFTA Surveillance Authority authorises aid to the Farice submarine cable project

19.7.2006

Today the EFTA Surveillance Authority closed its formal investigation procedure regarding the Icelandic submarine cable project. It authorized the two support measures granted by the Icelandic State in favour of this project, which consisted of a state guarantee and a share capital increase by the Icelandic State  in favour of Farice hf., the company responsible for preparing, constructing and operating the cable.

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 State 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 minor shareholders.

Iceland notified the Authority in February 2004 of the support measures in favour of the Farice project. In May 2005, the Authority opened the formal investigation procedure.

The Icelandic State had granted a state guarantee for a loan to Farice hf., enabling the company to obtain better financing conditions than it otherwise would have achieved. The Authority concluded that the State increased its share in Farice hf. in a situation where the private shareholders were not prepared to proportionally increase their share capital. In the Authority’s view, the State did therefore not act under market conditions.

The Authority thus considered both support measures to be state aid, but authorized them as being compatible with the functioning of the EEA Agreement.

The Authority found that the support measures were necessary to secure reliable internet connectivity to Iceland. Because of its geographic location, Iceland is particularly dependent on having access to reliable and economic telecom connectivity, which could not be guaranteed by its existing CANTAT-3 connection. The Farice project could not be carried out as a purely private initiative and therefore depended on the Icelandic State’s participation. Given the limited aid amount granted for this project and considering that Farice hf. ensures access to its cables on an open, transparent and non-discriminatory basis, the Authority authorized the measures. The Authority has noted that CANTAT-3 has proven able to compete with Farice hf. and that earlier plans to channel the CANTAT-3 activity also through Farice hf. have not been realized.

For further information, please contact:
Mr. Amund Utne, Director, Competition and State Aid Directorate,
Tel. (+32)(0)2 286 18 50,
Ms. Annette Kliemann, Senior Officer, Competition and State Aid Directorate,
Tel. (+32)(0)2 286 18 80 or
Ms. Maria J. Segura Catalán, Officer, Competition and State Aid Directorate,
Tel. (+32)(0)2 286 18 53.

 

19 July 2006




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