Council of State auditor finds evidence against Telenet deal

Internet and cable provider Telenet could lose up to one-third of its clients if a deal made more than five years ago is struck down by the Council of State. This week the auditor of the council issued an opinion in the so-called Interkabel case, which, if followed by the council, would annul the deal.

In 2008, the Flemish intercommunals – groups of two or more municipalities joined together to provide some sort of public utility, such as water, gas or, in this case, cable television – voted to hand over the operation of their cable network to Telenet for €380 million. The intercommunals would remain owners of the network.

Belgacom, Telenet’s main competitor, filed suit against the sale, which it argued should have been open to bids, and made a counter-offer of €420 million. In the end, Telenet bid €427 million for the right to exploit the network for 38 years; Telenet would also pay investment and other costs. 

The deal gave Telenet some 800,000 customers in four Flemish provinces – equivalent to one in three of its current customer base. More importantly, the deal allowed Telenet to offer “triple play” – a bundle of telephone, internet and TV – across Flanders.

Belgacom’s lawsuit remained on the books, and last year the European Court of Justice in Luxembourg ruled that not only Belgacom but also foreign operators should have been allowed to bid for the Interkabel network. The auditor of the Council of State has followed that reasoning, and it is now up to the Council of State to provide a final ruling. The council is not bound to rule according to the auditor’s advice, but it does in a majority of cases.

That would allow Belgacom to ask the commercial tribunal of Brussels to strike down the deal and take the whole procedure back to square one.

A spokesperson for Telenet told De Tijd newspaper that there is unlikely to be a final ruling on the case until 2017, and the worst-case scenario is unlikely. “We’re convinced we won’t lose customers,” said Evelyne Nieuwlandt. “Possibly there will be a discussion as to whether Belgacom has the right to damages, and the responsibility for that lies in the first place with the intercommunals.”