TPG Telecom’s (TPM) $1.56 billion acquisition of internet group iiNet (IIN) has been approved by the competition regulator and will get the greenlight from the courts later today and kick off from Monday.
That’s after the deal was given the greenlight yesterday by the competition regulator, the ACCC. The Commission’s approval was the final hurdle for the deal to overcome after iiNet shareholders overwhelmingly approved the bid in July.
The decision means that TPG will now become Australia’s second-largest provider of fixed-line broadband services behind Telstra and ahead of Optus.
The ACCC’s approval came despite the Commission revealing earlier this week that of the more than 100 submissions, a majority objected to the deal.
The Commission rejected those opposed to the deal who claimed it would damage competition, saying it was unlikely to do so in the highly competitive $40 billion-a-year telco sector.
“While the ACCC was concerned that the acquisition of iiNet by TPG may lessen competition in the retail fixed-broadband market, particularly in the short term, the ACCC concluded that this would not reach the threshold of a ‘substantial’ lessening of competition as required under section 50 of the Competition and Consumer Act,” ACCC chairman Rod Sims said in yesterday’s statement.
The ACCC received a large number of submissions from consumers who claimed that iiNet’s strong track record for customer service and competition would be trashed and broadband prices would go up if the deal went ahead.
But the ACCC found that the combined competitive pressures from Telstra, Optus, and M2 (which operates brands including Dodo and iPrimus) would limit harm to competition.
“This constraint would provide sufficient incentive for TPG to maintain the iiNet service if there is consumer demand for it and for other suppliers to meet that demand if they fail to do so,” the ACCC said.
“However, the ACCC has noted the growing consolidation in what will now become a relatively concentrated broadband market. Any future merger between two of the remaining four large suppliers of fixed broadband is likely to raise serious competition concerns,” Mr Sims said.
The ACCC also rejection claims from concerns from Macquarie Telecom, saying that the acquisition would not substantially lessen competition in the market for wholesale transmission services.
The ACCC took into account the important role of non-vertically integrated suppliers of wholesale transmission services. These suppliers assist in promoting a more competitive wholesale transmission market, and can also help to facilitate competition in the supply of retail broadband services.
“Any future acquisition that would remove an important independent supplier in the wholesale transmission market will therefore also face very close scrutiny,” Mr Sims said in the statement.
TPG shares rose 2.6% to $9.40 yesterday on a day when the wider market was flattened by a string of weak to flat profit reports and continuing fears about the stability of Chinese markets.
