Could TPG Telecom’s (TPM) $1.56 billion takeover of rival ISP and broadband provider iiNet (IIN) be crippled or halted by competition concerns?
The competition regulator the ACCC said yesterday that it feared a successful bid for iiNet by TPG may substantially lessen competition in the broadband market.
iiNet has been up for sale since March when TPG launched a takeover bid. M2Group (MTU) (owner of the iPrimus and Dodo internet brands) launched a friendly offer, but TPG boosted its first offer and stands on the brink of possible success.
The TPG takeover would create Australia’s second-largest provider of fixed-line broadband services behind Telstra (TLS) and ahead of Singtel-Optus.
But that possibility worries the ACCC, according to a statement from the regulator yesterday.
“The proposed acquisition would combine two of the five largest suppliers of fixed broadband in Australia. The ACCC is exploring the extent to which the acquisition of iiNet will reduce competition by reducing the likely competitive tensions in respect of pricing, innovation and service quality,” ACCC Chairman Rod Sims said in the statement.
“The ACCC has received a number of submissions from consumers. Their concerns primarily focus upon fears that iiNet’s customer service levels will decline as a result of the proposed acquisition.
“The ACCC is also considering whether the competitive constraint posed by the remaining competitors, namely Telstra, Optus, M2 and the much smaller market participants, would be sufficient to prevent a substantial lessening of competition in the supply of fixed broadband services. As a general proposition, competition is stronger when the market contains more competitors,” Mr Sims said.
TPM vs IIN 1Y – ACCC raises issues with telco takeover
The ACCC said its preliminary view is that the proposed acquisition is unlikely to raise competition concerns in other markets, including in relation to the supply of wholesale transmission (or backhaul), mobile broadband and voice services.
"The proposed acquisition is likely to increase the extent to which TPG is vertically integrated, but this would be unlikely to materially alter the level of competition in the market for the supply of wholesale data transmission services or any other relevant market," the ACCC said in its issues paper yesterday.
On the question of the horizontal effects in markets relating to the supply of retail fixed voice, mobile voice, mobile broadband and subscription television services the ACCC said its preliminary view was that the proposed acquisition of iiNet “is not likely to raise competition concerns for the supply of these services".
"However, the major telecommunications service providers typically offer bundling as a way of competing to attract customers. Therefore, concerns arising from the proposed acquisition in the market for the supply of retail fixed broadband services may be relevant to other markets,” the ACCC said.
The Commission emphasised this was not "a final decision". It provides the ACCC’s preliminary views on the proposed acquisition and the lines of further inquiry that the ACCC wishes to undertake.”
So the Commission said it is inviting "further submissions from interested parties in response to the Statement of Issues by 2 July 2015. As a result, the ACCC’s final decision will be deferred until 20 August 2015.”
But the regulator said its initial view was that competition would not be reduced in other markets such as backhaul service, phone calls and mobile broadband.
The ACCC called for more submissions to be sent in by July 2 with a final decision expected by August 20, but warned this timing could change.
On the market yesterday shares in both TPG (up 1.5% to $8.68) and IIN (down a cent to $9.59) reflected the uncertainty about the ACCC’s concerns.
