Australia’s antitrust authority has given the green light to ISP Vocus Communications‘ acquisition of its larger rival M2 Group, despite warning earlier this year that continued consolidation moves would come under increasing scrutiny.
The Australian Competition and Consumer Commission (ACCC) has given the green light to ISP Vocus Communication’s (ASX:VOC) agreed A$1.3bn (US$930m) acquisition of larger rival M2 Group (ASX:MTU).
“The ACCC concluded that this was primarily a merger between two complementary businesses,” ACCC chairman Rod Sims said.
“Significantly, the merged firm will also face significant competition from Optus, Telstra and TPG. This merger consolidates the fourth player in the market.”
The deal was announced in September, not long after Sims sounded warnings about a “relatively concentrated broadband market” after clearing previous sector deal TPG-iiNet.
He said any future merger between two of the remaining four large suppliers of fixed broadband – incumbent telco Telstra, TPG-iiNet, Singapore-owned Optus and M2 – would likely raise serious competition concerns.
Today, the regulator said that Vocus and M2 had limited overlaps in the supply of retail and wholesale fixed broadband services, retail and wholesale fixed voice services, the acquisition of transmission services or the supply of data centre services.
Furthermore, where they overlap, M2 mainly focuses on residential and small business customers, while Vocus specialises in large enterprise and government customers.
Because neither company is a significant supplier of wholesale transmission services, the deal would not significantly increase vertical integration between wholesale and retail telecommunications services providers, the authority said.
However, the acquisition also requires the approval of the New Zealand Commerce Commission, which is seeking market feedback after raising preliminary competition issues.
The regulator said it is focusing on whether the merged entity will be able to raise prices or reduce quality by itself, and whether it would be able to raise its rivals’ costs to render them less able to compete.
“The Commission invites submissions from parties who consider that they have information relevant to the Commission’s consideration of this matter,” it said.
It has set a deadline of Friday 13 November 2015 for submissions.
Vocus provides a range of data and voice services to customers utilising its own, and third party, networks.
M2 supplies telecommunications services to customers through its Dodo, iPrimus, Commander and Engin brands, and is primarily retail focused. It supplies telecommunications services to retail customers.