MTU M2 Bids $1.5b for IINET, page-43

Timely and pertinent from today:

http://www.itnews.com.au/news/accc-defends-approval-of-tpg-iinet-merger-408744

ACCC defends approval of TPG/iiNet merger

Sep 1 2015
1:00PM

Hints at backhaul price cuts.

ACCC chairman Rod Sims has defended his decision to approve TPG’s takeover of iiNet, but admitted it was not a “black and white” issue.

In a speech delivered to the ACCAN national conference in Sydney today, Sims also revealed a major decision on backhaul pricing determination was just “days away".

In discussing the ACCC’s decision to approve TPG’s $1.56 billion takeover of iiNet, Sims acknowledged the deal “would lessen competition in the relevant markets” but argued it wouldn't be substantial.
“The question is where does the ACCC draw the line? Should it have drawn a line in the sand with respect to the TPG/iiNet acquisition, or will it be the next transaction? The answer is not black and white,” he said.

Sims suggested the regulator would be much tougher on any further consolidation of the telecommunications sector, especially if the deal involved Telstra, Optus, TPG or M2.

“There are shades of grey, but we are now extremely close to the line as things stand today,” he said.
M2 Group chief executive Geoff Horth said his company was actively investing potential acquisitions in both the telco and energy markets following the TPG iiNet takeover.

Backhaul price determination imminent

Sims said transmission networks played a particularly important role in promoting competition in the telecommunications sector.

“Maintaining a competitive backhaul market which includes non-vertically integrated suppliers of wholesale transmission services .. is also important for fostering competition at the retail level,” he said.
“Independent suppliers have the incentive to encourage entry and expansion by smaller players who, unlike Telstra, Optus, and TPG, have little or no transmission infrastructure of their own.”

He revealed the ACCC’s final access determination in its domestic transmission capacity service inquiry would be handed down “in the next couple of days”, indicating price cuts were on the cards.

The decision will cover transmission on routes where there insufficient competition, and will set prices for ethernet and fibre backhaul links, superceding an earlier decision handed down in 2011.

“The ACCC has consulted closely with industry in its development of its draft decision and the benchmarking model used to price regulate routes,” Sims said.

“This decision will see prices for regulated routes follow the downward trends we have seen on more competitive routes."

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