The Australian Competition and Consumer Commission (ACCC) has given the final green light to Vocus’ acquisition of Nextgen Networks with its decision not to oppose the deal on the grounds of diminished market competition.
Vocus announced in June it was buying Nextgen in a deal worth $807 million, picking up Nextgen’s backhaul assets, including the North West Cable System (NWCS) and Australia Singapore Cable projects.
After an assessment of the deal, the competition watchdog said on Thursday it had found that the services supplied by Vocus and Nextgen were largely complementary.
And, where there was overlap between the two companies, the ACCC considered the combined competitive constraint from other major wholesale suppliers — Telstra, Optus, and TPG — would “likely be sufficient” to limit any harm to competition.
{loadposition peter}The ACCC also closely examined vertical integration issues in its assessment of the proposed acquisition.
“In assessing this potential transaction, we took into account that Nextgen is the only remaining significant supplier of wholesale transmission services that isn’t vertically integrated. This possible acquisition has come under close scrutiny due to that fact, as I have said in the past that it would,” ACCC chairman Rod Sims said.
Sims said the ACCC really had to consider whether the acquisition had the potential to make it harder for smaller broadband providers to compete if they have to acquire wholesale services from competitors that are vertically integrated.
But, the ACCC chief says the market expressed very little concern over the proposed acquisition.
“There was very little concern raised by market participants. Small broadband providers say they are not generally reliant on Nextgen to be able to compete. In addition, excess capacity in the wholesale transmission market provides an incentive for providers of wholesale transmission to sell that capacity, even if they are vertically integrated.”
The ACCC says that while Vocus’ acaquisition of Nextgen hasn’t raised concerns it will keep a “close watch” on competition in the telecommunications industry “especially given recent consolidation and increased vertical integration”.
And, Sims says future potential mergers or acquisitions that increase concentration “can expect to receive close examination from the ACCC”.
Post-acquisition, Vocus plans to expand its connection points to the NBN from 68 to 112 of a possible 121 nationwide NBN points of interconnect (POIs), and Sims says this will provide additional wholesale options for smaller broadband providers at those POIs and will also offer access to a broader bundle of products.
Vocus chief executive Geoff Horth, says the company is “extremely pleased” with the announcement from the ACCC and will move as quickly as possible to close the transaction and integrate the business under the Vocus umbrella.
“We will be working to ensure that we leverage the benefits of our expanded infrastructure platform and increased scale across our customer base," he said.
“We look forward to welcoming the Nextgen team into Vocus as we move into the next exciting phase of growth in the business.”
According to Horth, the Vocus corporate and wholesale business continues to perform strongly, exceeding new sales targets in Q1 FY17 and “will be further strengthened with the ability to target new customer segments and markets following the integration of the Nextgen assets”.