TV2 claims that its principal activity lies in extensive and expensive public service obligations that govern the enterprise’s main channel. TV2 states that such activity currently accounts for more than […] % of the costs of the main channel.

TV2 refers to the political decision that led to the current situation. The Danish Government and the parties that supported the current Media Policy Agreement agreed that under the restructuring plan, public compensation would not be reintroduced for expenses that TV2 bears in discharging its public service obligations. It was decided, on the other hand, to introduce a sustainable market-based business model for TV2 which would ensure that the enterprise could compete on the relevant markets despite its public service obligations, a decision welcomed by TV2. TV2 argues that the most important element in this context is the removal of the previous ban on the levying of user charges for the main public service channel, effective from 1 January 2012. TV2 claims that the aid does not entail operational or commercial advantages, but simply ensures that TV 2 will be able to use financing options open to its competitors. TV2 argues that its main channel cannot be seen in isolation, as both the main channel and the niche channels underpin the group’s financial result. TV2 cannot, in any case, fail to discharge its public service mission, which should be acknowledged when applying the Guidelines or Article 106(2) TFEU.

TV2 notes that despite the fact that it dominates the Danish television advertising market, competition in this market is strong and is characterised by the presence of financially robust multinational groups. TV2 also claims that its main competitors are not prevented from entering the market, since they have launched a number of new channels in the Danish television market (e.g. SBS 6 (Pro 7), TV3 Puls (MTG) and Canal 9 (Bonnier)).

As regards the pay-TV market, TV2 points out that the group does not have a dominant position on this market, while also noting that the only major Danish commercial TV channel not operating on the market is TV2’s public service channel. Furthermore, TV2 estimates that the niche channels currently have a share of approximately […] % of the pay-TV market, and expect the station’s total market share to rise to around […]-[…] % once TV2 can start levying user charges for the main public service channel in 2012.

TV2 points out that it was not able to obtain any loans from banks and that it was not even easy to get a mortgage for its property in Kvaegtorvet. TV2 points out that the uncertainty resulting inter alia from the open State aid cases has deterred banks from providing the necessary financing. TV2 considers the duration of the restructuring plan to be appropriate and points out that any improvement in its financial situation will only affect its draws on the credit facility, and not its business model, which should ensure TV2’s profitability in the medium and long term.

TV2 argues that the introduction of end-user charges for the main public service channel does not entail State aid, but merely gives the channel the same opportunities as its competitors to use the market’s most conventional means of operating on the market, namely charging users who choose to use its services. Distortion of competition could be remedied by applying Article 101 or 102 TFEU. According to TV2, the end-user charge, among other elements of the restructuring plan, does not entail any distortion of competition on the relevant markets. TV2 argues in this respect that the plan will ensure that the TV2 group, particularly the main public service channel, will have the necessary liquidity until the introduction of end-user charges. TV2 also states that an alternative re-introduction of non-market based funding as public service compensation would not be preferable to the introduction of end-user charges, in terms of State aid law.

TV2 stresses that being prevented from launching new channels is a real sacrifice. It points out that with the digital switchover and sale of its network, it loses the advantage it has hitherto enjoyed via its co-ownership of the network. In response to the opening decision’s question of whether the sale of certain programmes to third parties or restrictions on broadcasting (e.g. sports) should be considered, TV2 responds that the standard contracts bar TV2 from assigning rights to third parties. Danish fiction and sports are part of TV2’s public service programming.

SBS claims that neither TV2, nor any of its subsidiaries, is eligible for aid under the restructuring guidelines. In this respect, SBS points out that TV2 Denmark, in its first half-yearly report for 2009, had a net equity of DKK 644,9 million, and that the company does not fulfil the criteria for insolvency proceedings. Any loss resulting from the public service obligation should be analysed under Article 106(2) TFEU, which has not been invoked by the Danish Government.

SBS argues that the cost allocation between the different parts of the TV2 group must be properly assessed, especially since the costs of the niche channels are very low compared to those of competitors. The main channel was regarded as a stand-alone operation which could be made profitable by proper pricing standards.

SBS asserts that the TV2 Group was profitable in the 2004-2008 period, if the now abandoned loss-making activities such as TV2 Radio and the impact of the Commission’s recovery decision are taken out of the equation. In any event, TV2 could become profitable, e.g. by reducing costs.

SBS states that the restructuring plan, if it is to be approved at all, should be limited to the time it would take to sell off assets to address liquidity issues.

SBS states that the introduction of end-user charges will in practice have the same effect as an increase in licence fees, and should be classified as State aid in line with Case C-206/06 Essent Netwerk Noord BV. There are significant differences from Case C-345/02 (Pearle), because the measure was introduced on the sole initiative of Denmark and TV2, and because user fees are not earmarked for specific purposes chosen by the viewers.

SBS stresses the importance of analysing end-user charges within the framework of the restructuring aid. An agreement to introduce end-user charges is likely to affect TV2’s market behaviour and that of relevant third parties such as banks, as of the date of approval of the restructuring plan rather than the date of implementation of the end-user charges. It further criticised the fact that there is no cap on the amount of end-user charges which TV2 is able to levy, nor any conditions regarding its use. End-user charges can also be used to finance commercial activities.

SBS states further that the introduction of end-user charges cannot be reconciled with the concept of public service. This means that the restructuring aid as such cannot be justified under Article 106(2) TFEU unless the plans for user charges are dropped. SBS also states that the anticompetitive effects of the user charges are clear, and particularly that it may lead to some operators having to leave the market and that it will also allow TV2 to invest even more aggressively in new content. This is a bad thing, particularly because TV2 is exceptional in that it holds a dominant position on the advertising market.

SBS claims that there is a need for sufficiently strict compensatory measures. It therefore suggests that TV2, firstly, should not be allowed to introduce user charges. Secondly, public tendering should be introduced to ensure more correct internal transfer pricing when programmes are sold from TV2 to its subsidiaries. Thirdly, TV2 regional channels could be transferred to Danmarks Radio, since the regional channels receive substantial amounts of State aid and because households paying a licence fee and also receiving pay-TV would be paying twice for the TV2 regional channels. Fourthly, TV2 should be required not only to not launch new commercial channels, but also to sell at least some of the existing channels. Lastly, TV2 should be obliged to allow advertising from competing operators on its network.

SBS also suggests that a number of safeguards should be put in place so as to ensure that TV2 does not use the aid and/or user charges to distort competition. Firstly, Denmark should not be allowed to apply discriminatory user charges. Secondly, TV2 should not be allowed to bundle the main channel with the other channels on the distribution market, and TV2 should be obliged to supply TV2 as a stand-alone channel. Thirdly, TV2 should be barred from using the aid or user charges for any activity other than the main channel, and from dumping prices in the advertising market. Fourthly, TV2 should be obliged to give an undertaking that it will not use non-transparent rebates.

Viasat asserts that TV2 is not a firm in difficulty, pointing in particular to the profit in 2008. It claimed that TV2 would be profitable in the future, referring, inter alia, to TV2’s profit for the first half of 2009 (which forecast a profit of DKK 249 million before tax). In view of the later information that TV2 in fact made a loss for 2009, Viasat considers this minor loss to be associated with an overall drop in the advertising market of 18,7 % compared to 2008. It shows that TV2 has now managed to adjust its costs to the current commercial and financial environment. As concerns the losses in 2007, Viasat points out that these are mainly due to TV2 Radio, which has subsequently been sold off. TV2 did have a decrease in turnover in 2008, but so did most firms, and TV2 still managed to increase its pre-tax profits.

In more detail, Viasat stresses that even though a large part of TV2’s interest-bearing debt is still short-term, this is not a problem as long as TV2 can refinance it. TV2’s financial costs dropped in 2009 from DKK 49,2 million to DKK 19 million. TV2 has also spent substantial funds on new content acquisition. Furthermore, the negative cash flow in the 2006-2008 period was mainly due to unusually large investment activities, and not costs related to TV2’s operating activities. The negative cash flow could thus have been eliminated by postponing or reducing investments. In the same vein, the reason why TV2 had an increase in its debt was that TV2 invested heavily during 2006-2008.

Viasat also points out that the interest burden seems to have decreased as of 2008. Viasat also questions whether TV2 has problems in obtaining loans, since it seems that TV2 sought to obtain loans from Danske Bank only. Moreover, this took place at a time when it was more difficult to obtain a loan than it is now.

Regarding the exogenous factors, Viasat agrees with the assumption in the opening decision of a 1,02 % GDP growth per year. Viasat especially notes that the forecasts concerning the growth of the advertising market made by PWC, on which the Danish Government relies, are substantially more conservative than those by others, especially forecasts made by firms that are active on the market. In its comments on the opening decision, Viasat provides its own forecast for the TV2 group for the 2009-2019 period (report Audon Partners), which shows that TV2 will not be condemned to going out of business in the short or medium term.

As regards the profitability of the public service channel, Viasat stresses that the TV2 Group consist of such synergies that it is impossible to consider the profitability of each activity in isolation. The main channel should thus not be assessed in a stand-alone perspective. Notwithstanding this, the transfer pricing between TV2 and the niche channels is flawed as the price is significantly less than cost. Viasat supplies calculations of profitability in which costs are split according to the channels’ turnover. Viasat also states that when compared to the performance of comparable media companies, the niche channels’ financial performance strongly suggests that the segmented reporting in the TV2 group should be disregarded. Viasat finally remarks that TV2 could auction the right to retransmit its most attractive programmes, excluding sporting events, e.g. drama, fiction and documentaries, to boost profits for the main channel. Viasat also fears that the aid could be used for aggressive market behaviour and states that TV2 in the past invested in drama series acquisitions by outbidding competitors, raised prices for TV2 news and granted rebates.

Should the Commission come to the conclusion that there is a need for aid, that aid should target the immediate problem, i.e. the cash flow, rather than operations. This means that TV2 should not be allowed to become a pay-TV channel, as it would be sufficient to supply it with a credit facility. Moreover, the introduction of user charges will supply TV2 with funds with which it will be able to continue abusive behaviour in the advertising market, and risk eliminating competitors from the market. Viasat also questions whether the scheme is in line with TV2’s universal public service obligation.

Viasat primarily emphasises the anticompetitive impact of user charges, because these will push other operators’ programmes towards more expensive programme packages, leading them to lose revenue from subscriptions and advertising.

Viasat moreover claims that the compensatory measures suggested are in fact not a sacrifice, as there is no room for further channels anyway. As stated above, Viasat remarks that TV2 could auction the right to retransmit its most attractive programmes (excluding sporting events), e.g. drama, fiction and documentaries, to boost profits for the main channel.

Finally, Viasat also states that it is unlikely that Article 106(2) could be invoked by the Danish Government.

The state resources involved confer an economic advantage on TV2 in that the same financial instruments at market conditions would attract a higher borrowing cost, or higher fees, if any market operators agreed to make further funds available to the beneficiary at the amount envisaged. According to the evidence submitted by Denmark, none were willing to do so.

These resources will allow TV2 to continue operating on markets on which it is currently active. These markets include the market(s) for sale and purchase of broadcasting rights, the market(s) for pay-TV services and the market for TV advertising in Denmark. On those markets, TV2 competes with other broadcasters such as SBS or Viasat, among others. It follows that by favouring TV2, the aid in question distorts or threatens to distort competition on those markets.

Since Article 107(1) TFEU applies, the restructuring aid package needs to be assessed in terms of its compatibility with the internal market.

The Guidelines provide for the possibility of granting rescue aid as a temporary assistance for firms in difficulty pending the preparation of a restructuring plan or to address an acute liquidity crisis. According to point 26 of the Guidelines, the deadline for putting an end to the aid is extended until the Commission has reached its decision on the plan. The fact that the rescue aid facility is still in place for TV2 is in line with that stipulation, as TV2 has submitted a restructuring plan within the deadline.

Restructuring aid must be based on a feasible, coherent and far-reaching plan to restore the firm’s long term viability within a reasonable time frame. Restructuring usually involves the following elements: the restructuring of all aspects of the functioning of the company, the reorganisation and rationalisation of the firm’s activities, including the withdrawal from loss-making activities and financial restructuring. Restructuring operations, if benefiting from State aid, cannot be limited, however, to making good past losses without tackling the reasons. Furthermore, the restructuring has to be financed at least partially by the own resources of the company. Finally, compensatory measures must be adopted to minimise the distortive effects of the aid. The Commission will in the following examine whether these conditions are met.

According to point 9 of the Guidelines, a firm is in difficulty where it is unable, whether through its own resources or with funds it is able to obtain from its owners/shareholders, to stem losses, which, without outside intervention by public authorities, will almost certainly condemn it to going out of business. Point 11 of the Guidelines mentions certain criteria according to which a firm is in difficulty, even where none of the criteria of point 10 of the Guidelines are present. Point 11 stipulates that ‘in any event, a firm in difficulty is eligible only where, demonstrably, it cannot recover through its own resources or with the funds it obtains from its owners/shareholders or from market sources’.

The Commission comes to the conclusion that at the time of the notification of the restructuring plan, TV2 constituted such a firm in difficulty. This can be seen from the figures in the Commission’s decision opening the formal investigation procedure, and more importantly from the figures produced in recitals 36-42 of this Decision, which were submitted at a later point in January 2010 and which describe a company with losses, declining market shares, mounting debt and in particular negative cash flows due to declining advertising revenues, bad investments and increasing interest charges. While it turned out later that the company had indeed, as competitors estimated, made a profit in 2008 (the estimate at the end of March 2008 still pointed to […] of DKK […] million), this profit was small, and does not in itself alter the finding that the company could not continue its operations without external financing. The private credit facilities at the company’s disposal were short term and could be withdrawn any time. The company had an acute liquidity need which it could not overcome by its own resources.

Nor could it obtain external financing. There was a danger that short-term credits would be withdrawn. As already stated in the opening decision, the main financing bank of TV2, […], asked to reduce its loan and credit facilities in 2008. In addition to TV2’s problems, which even included mortgaging its own premises in Odense, Denmark produced evidence that other banks had also refused to provide TV2 with long-term loans (see recitals 44 et seq. of this Decision). The banks pointed to the weaknesses in TV2’s cyclical income stream based on advertising revenues, which as a business model was considered unsustainable. Pending legal cases added to the problems. As a result, TV2’s funding became increasingly tilted towards short-term liabilities, and thus fragile. In other words, TV2 was unable, within the meaning of point 11 of the Guidelines, to recover from the situation using funds obtainable from market sources.

These findings are not called into question by the submissions from competitors. For completeness, it should be mentioned that the Guidelines do not require the company to be in actual insolvency proceedings. On the contrary, aid can be given — under strict conditions — to prevent precisely that.

As to the arguments of the competitors that TV2 is a profitable company, or could become profitable, the above-mentioned results for TV2 show that the company realised a profit in 2008, but contrary to what Viasat had estimated, it incurred a loss for 2009 of DKK 27 million, which deviated significantly from the Viasat forecast of DKK 249 million in profit. The profit for 2010 is also estimated to be much smaller than that assumed by Viasat. The Commission has not found any errors in the methodologies used by TV2 and its consultant PWC (see also recital 41 of this Decision).

The fact that the company has drawn much less on the rescue aid credit facility than it could have does not mean that it cannot be regarded as a firm in difficulty. It would be an absurd finding to disqualify a beneficiary of rescue and restructuring aid from eligibility for the aid if cost-saving measures and other measures envisaged in the restructuring plan later prove to be successful, and help the company to deal with its financing problems largely using its own resources. This might, however, lead to the result that at a certain point in time ongoing State aid is no longer necessary, which will be discussed below (see recital 149). In any event, the credit facility was always constructed in such a way that the company could only get access to it in the event of a certified need. This was done in order to keep the aid to the minimum, and TV2’s behaviour in trying to achieve the restructuring process as much as possible using its own resources is in line with that requirement.

It should furthermore be underlined that the numerous allegations by Viasat and SBS that TV2’s weak financial situation is self-inflicted through poor management decisions or bad investments is irrelevant for its eligibility under the Guidelines, which do not ask for the cause of the financial problems of the aid beneficiary, but only seek to ascertain that the aid beneficiary is indeed a firm in difficulty.

Competitors have also, in this respect, asserted that TV2’s problems largely stem from the public service channel and that internal cost and transfer pricing adjustments could remedy this situation. However, the Commission does not consider this argument relevant in a situation in which the aid goes to the group as such, including the commercial operations. The Commission notes, however, that TV2 has separate and audited accounts for the public service and other activities, and a fully documented and audited transfer pricing policy, which is relatively simple, transparent and aims to give an accurate picture of the different activities based on transfer prices on market terms.

On the exogenous factors, Viasat agrees with the assumption of a GDP growth of 1,02 %. On the development of the advertising market, the parties agree that TV2’s advertising revenues decreased by 19 % in 2008. However, Viasat and SBS wrongly interpret Denmark’s forecast on the future development of the advertising market. Contrary to their understanding, Denmark did not forecast that the advertising market would drop by 10 % each year in the 2009-2013 period, but simply stated that […].

Regarding the argument that licence fees granted to the regional broadcasting stations should have been included in the assessment of TV2’s financial situation, the Commission finds that the licence fees finance the programme production of regional broadcasters and are relevant only in relation to that. In this regard, the Commission notes that the regional TV2 stations are independent from TV2 and subject to their own public service obligations under the Danish Broadcasting Act, for which they receive licence financing. As to SBS’s argument that viewers will pay twice for the programme, it should be stressed that one of the payments — the subscription fees for TV2 main channel — result from the customer’s choice and have been found not to involve any State aid. In any event, it has been shown above that TV2 as a group was a firm in difficulty suffering from acute financing needs, since it could not obtain any external financing from banks. This included any potential benefits resulting from its obligation to broadcast these programmes.

Given that new situation, the Commission does not find that TV2 can still currently be classified as a firm in difficulty. There is therefore no need for any aid measure beyond the approval of this Decision, and the notified, non-implemented loan and credit facility contained in the restructuring plan should be repealed. For the same reason, the existing aid facility under the rescue aid decision should also come to an end.

Pursuant to point 34 of the Guidelines, the grant of the aid must be conditional on implementation of a restructuring plan which must restore viability to the company within a reasonable timescale. The restructuring plan describes the circumstances that led to the company’s difficulties as having been caused by new activities which did not turn out to be profitable, and the increasingly unprofitable public service channel. In the Commission’s view, the restructuring plan adequately addresses these issues.

The company is also giving up loss-making activities; in 2008, it sold its loss-making radio operation to the SBS group.

The company is expected to solve the structural problems leading to its liquidity needs by being permitted to charge subscription fees as of January 2012. The lack of profitability of the public service channel is due to its reliance on one source of income in the form of advertising revenue, which is cyclical and sensitive to the economic climate. This is also demonstrated by the reactions of banks, which refused to provide funding due to their concerns about trends on the advertising market and doubts as to TV2’s earning ability. The new business model will provide TV2 with a more stable income base by charging subscription fees for the viewing of its main channel. TV2 has forecast additional income from the end-user charges of DKK […] million in 2012. It also forecasts […] for the group in 2012. The Commission notes that besides […], the second source of revenue in the form of end-user charges will also make the company less vulnerable to downturns in cyclical activities. The Commission notes that the measures to achieve the turnaround originate in the restructuring plan itself and not from external factors.

The originally notified duration of the restructuring plan until 31 December 2012 spans a period of almost 4 years. This period was chosen because the Danish Government believed that with the introduction of a new business model and its first experiences in practice, banks would again be willing to lend money to TV2, i.e. the period was chosen to be long enough to amass this experience. However, given that all aid will be repealed with the adoption of this Decision (see above), the Danish Government now considers that the restructuring period should end on the repeal of all aid measures.

The Commission takes a different view. According to the Guidelines, restructuring should result in the company’s return to long-term viability. The Commission considers that the restructuring period lasts until the moment when the company has implemented all restructuring measures, ensuring such long-term viability. While all State aid measures will cease immediately on adoption of this Decision, the restoration of long-term viability to TV2 is not guaranteed as of this moment as long as TV2 still lacks a sustainable business model. Such a business model will only be established with the introduction of the end-user charges. The introduction of end-user charges is also the main restructuring measure directly addressing the most serious cause of TV2’s financial difficulties. The Commission therefore concludes that the restructuring period comes to an end on 31 December 2012, or at the point in time when TV2 is able to charge subscription fees from the end user, should this event takes place before 31 December 2012. It currently seems that TV2 is legally entitled to charge user fees only when its licence has been changed (while the current Danish Broadcasting Act already provides a possibility for TV2 to charge end-user fees, it is not allowed in the current licence).

According to point 38 of the Guidelines, in order to ensure that the adverse effects of the aid on trading conditions are minimised as much as possible, so that the positive effects pursued outweigh the adverse ones, compensatory measures must be taken. These measures may comprise divestment of assets or reductions in capacity or market presence. According to point 40 of the Guidelines, they must be in proportion to the distortive effects of the aid and the relative importance of the firm on its markets.

In this regard, the Commission notes that TV2’s competitors themselves launched channels in 2009 (SBS launched 6erene, Canal Digital will launch a sports channel, Viasat launched a channel on 23 March 2009, and the TV4 group launched Canal 9 in July 2009).

The Commission also considers the proposed compensatory measures to be in proportion to the distortive effects of the aid measures. It should be pointed out that these measures all end on the date of adoption of this Decision. In that regard, the Commission would point out that none of the notified restructuring aid measures has been, or will be, implemented. As can be seen from recitals 150 et seq. the rescue aid facility will also be repealed on adoption of this Decision. This means that the company will not receive any State aid. The actual payments made under the rescue aid facility were, however, limited (DKK 223 million drawn of DKK 1 000 million available). Most of the aid was actually drawn as rescue aid (DKK 208 out of 223 million were drawn until end 2008, i.e. within the six-month rescue period) and all the funds actually drawn from the credit facility have already been repaid to the State. Nor is the actual amount drawn from the credit facility — DKK 223 million — excessive in light of TV2’s 2008 turnover ([…] %). In light of this, the Commission does not consider it necessary to demand further compensatory measures from Denmark and the aid beneficiary. For that reason, the Commission does not see any need for further compensatory measures, as suggested by the competitors.

According to point 43 of the Guidelines, the amount and intensity of the aid must be limited to the strict minimum of the restructuring costs necessary to enable restructuring to be undertaken. The idea behind this provision is that the company, at the end of restructuring, is not equipped with surplus liquidity that it could use for aggressive market behaviour. Beneficiaries are expected to make a significant contribution to the restructuring plan from their own resources, including the sale of assets that are not essential to the firm’s survival. Such a contribution must be real, and may not include expected future profits such as cash flow. It must be as high as possible, at least 50 % for large firms. The Commission considers TV2 to be a large firm in the meaning of the Guidelines.

The Commission does not share the view of the Danish Government that any costs at all, in particular cost-saving measures, automatically qualify as restructuring measures. A company might incur expenditure in pursuing cost savings. Cost savings as described by Denmark in the present case do not, in themselves, represent a restructuring cost. Denmark provided a list of ‘classical’ restructuring costs, which consist of DKK […] million and which cover transaction costs related to the sale of the transmission network (DKK […] million), costs associated with the transfer to the new business model (DKK […]-[…] million) and staff costs for termination of contracts, legal and consultancy fees (DKK […] million). The Commission accepts these costs as restructuring costs.

According to the Commission’s case practice, restructuring costs include all extraordinary costs incurred in order for the firm to return to viability, but not regular operating costs incurred in the restructuring period. However, the present case concerns a company’s need of liquidity to bridge a transitional period until a new sustainable business model is in place. As outlined above, TV2 had a genuine financing need, since it did not have access to external financing. In this special case involving purely financial restructuring until the company changes to a more stable business plan, the Commission can also accept this need of financing as constituting a restructuring cost. It was the credit facility of the rescue aid decision (DKK 1 000 million) which provided the necessary temporary buffer to cover the financial gap. However, this facility was only transitional and could only be accessed when TV2 could demonstrate a financing need as certified by an external auditor. In the end, TV2 did not draw much from the credit facility (only […] % of it). In addition, most of the credit drawn (DKK […] million) was drawn during the period covered by the Commission’s rescue aid decision, i.e. within the six-month rescue period before the restructuring plan was submitted.

TV2 has contributed towards the above restructuring costs through the sale of assets, with the sale of the broadcasting network for the amount of DKK 640 million, and through external financing by mortgaging its premises in Odense at DKK 80 million. The contribution of DKK 720 million is well beyond the 50 % threshold for large firms. As stated above, TV2 used the proceeds from the sale of the network to reduce its debt. The money thus spent cannot be used for other purposes. In addition, as is clear from the above, all aid measures will end as of the date of this Decision and no new aid measures as notified under the restructuring plan will be introduced (see recital 150 of this Decision). There is therefore no danger, in terms of point 45 of the Guidelines, of any aid in excess of what was needed staying in the company.

According to point 46 of the Guidelines, the Commission may require additional measures from the Member State in order to ensure that the aid does not distort competition contrary to the common interest.

The Commission takes note of the arguments put forward by Denmark throughout the formal investigation, and the intention expressed by the aid beneficiary in supporting documents that the restructuring plan should enable TV2 to use business opportunities in line with its peers and to charge subscription charges. Denmark and TV2 further point out that the currently high equity buffer of TV2 with solvency (and net interest-bearing debt) ratios which are significantly higher (lower) than those of competitors, is only necessary because of the uncertainties of the pending State aid cases and the business model. Both TV2 and Denmark express a general willingness to bring the capital structure back in line with TV2’s peers once the State aid investigations are closed.

The Commission does not, on its part, see any need for TV2 to have a capital structure that is different from that of its peers once the business model and the pending legal cases have been resolved. Capital structures based on (artificially) high equity are advantageous for the company, because it will be able to attract funding at relatively low rates. Equally important, TV2 should bring its capital structure back to a level that ensures that competition is not distorted. The Commission would like TV2 to revert back to a normal capital structure by making dividend payments to the State, rather than by aggressively expanding its balance sheet by debt financing.

In line with points 49 and 50 of the Guidelines, Denmark has committed to submitting reports to the Commission no later than 6 months after the approval of the aid.

The Commission would underline that in the current case it is not the aid itself (the rescue aid facility), but another element of the restructuring plan (the end-user charges), which is the cause of the antitrust complaint. The end-user charges will be introduced in early 2012, i.e. after the aid facility has been repealed, via an amendment in the terms of TV2’s licence. It should also be taken into consideration that most of the aid actually drawn was during the rescue period and was authorised in the Commission’s rescue aid decision of 4 August 2008, and that all aid will be repealed when this Decision comes into force.

If the antitrust complaint, or third party comments in this proceeding, is to be understood also as a complaint against TV2 becoming a pay-TV channel, suffice to say that the mere introduction of user charges for the main channel cannot constitute an infringement of antitrust legislation. When TV2’s main channel becomes a pay-TV channel, this will lead to the entry into the pay-TV market of that channel. The entry of TV2’s main channel will most likely affect only competitors active in that market, and e.g. lead to the exit of some players from that market (the respective pay-TV packages), or to their having to lower their prices. These effects, however, are normal effects of entry into the market of a viable competitor. The mere fact that user charges are introduced, and that this will bring about increased competition, does not, therefore, contravene Articles 102 and 106 TFEU.

The complainant, and some other competitors in the third party comments, argue that the planned introduction of the ‘TV2 Alene’ card would have anticompetitive effects, also favouring the distributor Boxer. In short, the TV2 Alene model meant that customers would receive TV2 free if the customer did not buy other pay-TV services. According to the complainant, the TV2 Alene card would thus have a disincentive effect on customers planning to buy pay-TV, to the detriment of TV2’s competitors. As Denmark has withdrawn the suggested TV2 Alene-card, arguments as to whether it would have infringed the antitrust rules are devoid of relevance and do not, therefore, have bearing on the legality of the restructuring plan.

As to the fears of some competitors that the aid as such might be used for aggressive market behaviour, the Commission would point out that there are no indications that the State aid itself entails a breach of other provisions of the TFEU or leads TV2 to automatically engage in anticompetitive behaviour.

The Commission finds that the notified restructuring plan complies with the internal market according to Article 107(3)(c) TFEU in conjunction with the Commission’s rescue and restructuring Guidelines, subject to the following conditions.

Since the company is in a better financial condition following the sale of the broadcasting network, the Commission finds that no aid measures from the restructuring plan (loan and credit facility) should be implemented and that the credit facility in place (as authorised in Commission Decision No 287/08 of 4 August 2008) should be repealed with immediate effect from the date of this Decision. The Commission notes that the originally notified guarantee for the sale of the broadcasting network is no longer relevant, due to the completed sale of the network without the guarantee.

The Commission further takes note of the commitment by Denmark that the compensatory measure of not launching any new broadcasting channels covers both television and radio channels. This measure should remain in place until 31 December 2012 or, if the aid recipient is able to levy end-user charges before that date, until the introduction of the end-user charges. The introduction of the end-user charges is considered to be the point in time at which TV2 is legally entitled to ask for such remuneration.

The Commission takes note of the commitment by Denmark to instruct an independent financial expert to compare TV2’s capital structure with those of other media companies and to adjust the capital structure if it deviates markedly from the median or average of the relevant peer group. If there are substantial reasons not to adjust the capital, the Danish Government may notify an alteration of the restructuring plan to the Commission,