Thursday turned out to be a bit of a winning day for Telstra – in fact it got a three from three result.
Two came from the competition watchdog, the ACCC, while the third was the end result of the long process to expand into telecoms in the South Pacific, with support and funding from the Australian government.
First up the ACCC announced that it will not oppose Telstra’s $50 million acquisition of 51.4% of Media Innovations Holdings Pty Ltd, owners of Fetch TV.
The deal values all of Fetch at $100 million.
The ACCC said its review focused on whether Telstra would have the ability and incentive to foreclose competing broadband retailer’s access to Fetch TV.
Telstra TV comes with its retail broadband services, while Fetch TV supplies set top-boxes to broadband retailers to supply as an add-on to broadband services.
“Our investigation found that entertainment offerings are one important way for broadband retailers to differentiate themselves from competitors,” ACCC Commissioner Liza Carver said.
“However, Fetch TV does not appear to be critical or a ‘must have’ aspect for Telstra’s retail broadband competitors to offer consumers a competitive retail broadband service.”
Telstra and Fetch TV both supply content aggregation services through set-top-boxes.
Telstra supplies Telstra TV with eligible Telstra retail broadband services and Fetch TV supplies set-top-boxes to broadband retailers to supply as an add-on to broadband services, and directly to consumers through select retail stores.
Several broadband retailers, including those that offer Fetch TV, also supply other entertainment offerings or other inclusions. For example, SubHub by Optus allows customers to combine and save on subscription video on-demand services like Netflix.
Optus, the third largest broadband retailer and a customer of Fetch TV, has paused offering new Fetch TV services to broadband customers.
The ACCC also considered the overlap between Telstra TV, Fetch TV and Foxtel, which is 35% owned by Telstra and 65% owned and managed by News Corp.
The ACCC concluded that Telstra TV, Fetch TV and Foxtel would continue to face competition from other technologies and differentiated services such as smart TV’s and hardware devices such as Amazon Firestick, Google Chromecast, Apple TV and gaming consoles.
“While Telstra is the largest broadband retailer in Australia, we have carefully examined the facts and circumstances of this acquisition as well as changes in the way consumers access entertainment. We have concluded that this acquisition is unlikely to result in a substantial lessening of competition,” Ms Carver said.
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The second (provisional) win came after the ACCC issued a draft determination proposing to authorise Telstra and NBN Co and their related entities to amend agreements that they entered into from 2011 and 2014 which allowed the rollout of the national broadband network.
“The existing agreements, authorised under statute, provide the necessary legal certainty that certain conduct would not contravene Australian competition laws. This conduct is not the subject of any previous or existing ACCC authorisations,” the ACCC explained in Thursday’s announcement.
The draft determination follows Telstra’s proposed restructure which sees it seeking to incorporate its related entities into the existing agreements with the NBN through an amendment.
Under the proposed authorisation, entities across the restructured Telstra group will be able to continue to give effect to their existing rights and obligations owed to NBN Co.
“In our assessment we are limited to considering the potential public benefits and detriments that flow from the restructure and not from any existing agreements,” ACCC Deputy Chair Mick Keogh said.
“The Telstra restructure is likely to result in some public benefits including increasing value to the shares widely held by Australian retail investors, largely by improving commercial opportunities.”
“The ACCC understand that in the absence of the proposed authorisation, the Telstra Group’s restructure will not proceed, and they will be bound by existing agreements with the NBN and the statutory protections from the Telecommunications Act,” Mr Keogh said.
The ACCC is now seeking submissions from interested parties in relation to its draft determination before making a final decision in August/September 2022.
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And finally Telstra’s move into South Pacific with the assistance of the Australian government was completed this week with all approvals granted for it to buy Digicel Pacific for more than $A2.3 billion.
The acquisition of Digicel Pacific was announced in October of last year in partnership with the Australian Government.
The Australian government finance was provided to help Telstra forestall any move by Chinese telcos or investors to take control of Digicell which is the largest telco/mobile operator in the region.
Telstra contributed $US270 million of equity to the purchase price and the Australian Government, through Export Finance Australia, provided the remaining $US1.33 billion through a combination of non-recourse debt facilities and equity like securities. Telstra owns 100% of the ordinary equity.
Telstra CEO, Andy Penn said the company would be operated by Telstra International, headed by Oliver Camplin-Warner, as a stand-alone business, with the same team now running Digicel Pacific.
“We have been working closely with Pacific governments on this acquisition and we’d like to thank them for their cooperation and support. We look forward to continuing to work with them as we operate Digicel Pacific and strengthen our relationships in the region.”
Digicel Pacific will be overseen by a Telstra controlled board chaired by Telstra Enterprise Group Executive David Burns.
Digicel Pacific is the leading provider of communications services across PNG, Fiji, Nauru, Samoa, Tonga and Vanuatu. The company had around 2.8 million subscribers and 1700 employees generating $US466 million in service revenue for the financial year ended March 31 this year.
Telstra said it will account for this acquisition in its income statement as a 100% wholly owned entity.
With respect to the Papua New Guinea Additional Company Tax, the vendor has made arrangements to resolve the matter with the PNG tax authorities. Telstra is not part of this process, and the outcomes of this process are a matter for the vendor, Telstra said in Thursday’s statement.
