Commission Grants Clearance For Passive Mobile Tower Assets Deal

The Commerce Commission has granted clearance for Connexa Limited (Connexa) to acquire certain passive mobile telecommunications infrastructure assets from Two Degrees Networks Limited and Two Degrees Mobile Limited (2degrees).

The proposed acquisition would see Connexa, which owns the passive mobile tower assets formerly owned by Spark, acquire the passive infrastructure assets of 2degrees.

‘Passive’ mobile telecommunications infrastructure comprises the structures capable of hosting ‘active’ telecommunications assets. It can include underlying land interests, as well as physical structures such as towers, poles and fencing, as well as power systems and electricity connections. ‘Active’ infrastructure is the infrastructure on which mobile network operators run their mobile networks including antennae, cabinets, radio units, backhaul electronics and electricity meters.

Following the acquisition, Spark’s current shareholding of 34% in Connexa would fall to approximately 17% and it would maintain two directors on the Connexa Board.

In reaching its decision, the Commission considered the potential impact of the acquisition on competition for the supply of passive infrastructure services, and in downstream markets for the wholesale and retail supply of telecommunications services.

Chair Dr John Small said the Commission was satisfied that the acquisition is unlikely to substantially lessen competition in any New Zealand market.

“With the acquisition, there will only be two large national suppliers of passive infrastructure services to mobile network operators (MNOs): Connexa – serving Spark and 2degrees – and FortySouth, serving Vodafone. This compares with three providers if 2degrees’ assets were sold to an independent third party.”

“Given this, and Spark’s ownership interest in Connexa, we had initial concerns about the impact of the acquisition on competition for the supply of these services, and in downstream wholesale and retail telecommunications markets. We therefore published a Statement of Issues to test these concerns.”

After considering submissions in response to the Statement of Issues and other evidence gathered, the Commission is now satisfied that the acquisition is unlikely to substantially lessen competition.

“In passive infrastructure services markets, we consider that Connexa is likely to face sufficient competitive constraint after the acquisition, from a range of sources. First, it will face competition from large scale competitor FortySouth. Second, we consider that MNOs can also viably use small scale suppliers, as they do in Australia. Third, while the acquisition will result in all MNOs no longer providing passive infrastructure services in-house, we consider that self-supply will remain an option for each of them to drive competitive outcomes.

“Further, we are satisfied that the agreements in place between Connexa and 2degrees are sufficiently robust to protect the interests of 2degrees and ensure that competition in downstream telecommunications markets is unlikely to be substantially harmed, including in relation to the roll-out of 5G. The arrangements with 2degrees contain protections relating to both price and the quality of services provided.”

“Finally, we are cognisant that Spark will have an ownership interest in Connexa, as well as directors on its Board. We were concerned to ensure that Spark could not favour its own operations in downstream telecommunications markets at the expense of 2degrees. We were also concerned to ensure that the acquisition does not increase the ability of MNOs to coordinate their behaviour in a way that could harm consumers. We are satisfied that this is unlikely to be the case.”

A public version of the written reasons for the decision will be available on the Commission’s case register in due course.

Background
We will give clearance to a proposed merger if we are satisfied that the merger is unlikely to have the effect of substantially lessening competition in a market.

Further information explaining how the Commission assesses a merger application is available on our website.

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