Australian regulator clears TPG’s $1.2-bn iiNet acquisition

Australian Competition and Consumer Commission (ACCC) has given its final nod for the $1.2-billion (A$1.56 billion) acquisition of the country's third-biggest DSL internet service provider iiNet Ltd by the fourth-biggest TPG Telecom Ltd.

In its latest announcement yesterday, the regulator said it would not oppose the proposed deal.

ACCC Chairman Rod Sims said, ''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.''

However, the regulator warned that any future consolidation among major players in the broadband market would face very close scrutiny.

In May, iiNet had accepted the sweetened bid from TPG over a roughly equal rival bid from the fifth-biggest player M2 Group (See: iiNet accepts TPG's $1.2-bn takeover offer), that was overwhelmingly approved by the company's shareholders last month.

Based on a large number of public submissions, ACCC raised concerns over the deal in June saying that it could reduce competition by reducing the likely competitive tensions in respect of pricing, innovation and service quality, as TPG and iiNet were two of the five largest suppliers of the services in the country. (Australian regulator raises concerns over $1.2-bn TPG-iiNet deal)

The regulator's nod paves the way for the creation of Australia's second-biggest fixed-line broadband services provider behind telecom giant Telstra's Big Pond, pushing down SingTel-owned Optus to the third spot.

ACCC found that other major retail fixed broadband suppliers, Telstra, Optus, and M2 (which operates brands including Dodo and iPrimus) would still provide enough competition to the merged entity.

''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,'' Sims said.

The ACCC also concluded that the acquisition of iiNet by TPG will not substantially lessen competition in the market for wholesale transmission services.

Any future acquisition that would remove an important independent supplier in the wholesale transmission market will face very close scrutiny, the regulatory said.

TPG said that upon closing of the transaction, iiNet will operate as a separate brand under TPG.