Australian regulator raises concerns over $1.2-bn TPG-iiNet deal

The Australian Competition and Consumer Commission (ACCC) has released a statement of issues related to the proposed acquisition of the country's third-biggest DSL internet service provider iiNet by the fourth-biggest, TPG Telecom Ltd.

The acquisition will create Australia's second-biggest provider of fixed-line broadband services, behind telecom giant Telstra's Big Pond and ahead of SingTel's Optus and M2 Group's Dodo and iPrimus.

The ACCC is investigating whether the acquisition would be likely to reduce competiton in the market.

 ''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 a statement.

The ACCC said it has received submissions from consumers who fear that iiNet's customer service 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,'' Sims said.

However, the ACCC's 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, mobile broadband and voice services.

The regulator has invited further submissions from interested parties and a final decision is expected by 20 August 2015.

TPG, which launched its initial bid in March, was countered by a higher offer from Melbourne-based M2 Group.

Last month, TPG responded by raising its offer to A$1.56 billion ($1.2 billion), which was recommended by iiNet. (See: iiNet accepts TPG's sweetened $1.2-bn takeover offer).

TPG, controlled by Malaysian-born billionaire David Teoh, has over 670,000 broadband customers and owns the country's second-largest DSL network, while Perth-headquartered iiNet has a customer base of over 975,000.

Big Pond is by far the biggest fixed line internet provider with around 3 million customers followed by Optus with over 988,000.

In an interview with ABC News,  Sims said, "The key argument in terms of quality is that, firstly, will TPG keep the iiNet brand and customer experience in the marketplace and, secondly, if they don't, will somebody else just fill that gap, we need to weigh all of that.''