ComCom to assess potential Vodafone purchase

ComCom to assess whether Vodafone purchase would increase Infratil's market power

By Jenny Ruth

May 31 (BusinessDesk) - The Commerce Commission says it currently expects to make a decision on Infratil’s application to buy up to 50 percent of shares in Vodafone New Zealand by July 15, although that may be extended as its investigation progresses.

“The commission will give clearance if it is satisfied that the proposed acquisition will not have, or would not be likely to have, the effect of substantially lessening competition in a market in New Zealand,” the competition regulator says in its statement of preliminary issues.

Infratil and Canada-based Brookfield Asset Management are seeking clearance from the regulator for their $3.4 billion purchase of the local Vodafone operations, currently owned by the British-based multinational of the same name.

Infratil owns 51 percent of Trustpower which is using a “triple play” strategy of selling electricity, gas and telecommunications services in a bundle to help it make it more difficult for customers to switch to other providers of these services.

The commission notes that Trustpower has recently entered into an arrangement with Spark New Zealand to offer wireless broadband and mobile services.

“Although Infratil submitted that Trustpower and Vodafone will continue to operate as separate entities post-acquisition, for convenience we may refer to them in this document as ‘the merged entity,’” the commission says.

Infratil said in its application for clearance that company law and corporate governance would prevent Infratil from treating the two firms as a single entity.

The commission will consider the constraint from existing competitors, the extent to which they compete and the degree to which they would expand their sales if prices increased.

The commission will also look at potential new entrants and the countervailing market power of customers.

“The proposed acquisition would result in overlap in the supply of fixed line broadband and voice services to consumers as well as limited overlap in the supply of those services to business customers,” the regulator says.

“Given Trustpower’s plan to supply wireless broadband and mobile services to consumers, there are also potential future overlaps in those markets.”

Among the matters the commission will look at are whether Trustpower and/or Vodafone are stronger competitors in some regions than others, whether it is appropriate to define markets for bundled services that telecommunications retailers such as Trustpower and Vodafone offer and whether different types of broadband connection, such as copper wire, fibre or wireless, are substitutable.

The commission says it will assess whether Trustpower and Vodafone would have the power to unilaterally raise prices or to coordinate their behaviour with competitors.

It is calling for submissions on the proposal by June 14.

(BusinessDesk)

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