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State Aid

No state aid involved in lease of optical fibre cable in Iceland



Today, the EFTA Surveillance Authority decided that a contract concluded on 1 February 2010 between the Government of Iceland and the telecom undertaking Og fjarskipti (Vodafone) for the lease of an optical fibre does not involve state aid within the meaning of the EEA Agreement.

Following the departure of US military forces from Iceland in 2006, the Icelandic Government took over the operation of the Radar Agency, including the management of three optical fibres previously operated on behalf of NATO. This infrastructure is part of the approximately 1800 km long, eight-fibre optical cable circling Iceland and its North-West region. The remaining five fibres are owned and operated for commercial purposes by Míla ehf.

In April 2008, the State Trading Centre (Ríkiskaup) organised a tender for the use and operation of two of the three NATO optical fibres. The purpose of the tender was to lower maintenance and operating costs of NATO's optical fibres, to increase public broadband access and to encourage competition in data transmission. The contract with Og fjarskipti was concluded on the basis of the tender.

In July 2010, the Authority received a complaint alleging that the contract for the lease of the fibre involved unlawful state aid since the state did not obtain a market value for the transaction.

The Authority has today concluded that the lease contract at issue was concluded on the basis of a well-published and open tender procedure:

  • Five bids were submitted from four independent undertakings that fulfilled the general, technical and financial requirements set out in the project description.
  • Conclusion of the contract was based on the principle of accepting the best bid according to a predefined selection criteria.
  • The bid scoring highest was withdrawn by the bidder, but a contract was made with Og fjarskipti on the basis of its bid achieving the second-highest points.

On  the basis of information submitted by the Icelandic authorities, the Authority has also concluded that the rent paid by Og fjarskipti under the contract is well above the costs of the Icelandic state for making the fibre available for commercial use. The contract therefore did not involve any sacrifice of state resources.

On this basis, the Authority has concluded that the conditions for the presence of state aid within the meaning of Article 61(1) of the EEA Agreement are not met with respect to the contract at issue.


For further information, please contact:

Mr. Trygve Mellvang-Berg
Press & Information Officer
tel. (+32)(0)2 286 18 66
mob. (+32)(0)492 900 187

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