NZ Regulator clears Vodafone takeover of TelstraClear

Vodafone's purchase of Telstra's loss-making New Zealand subsidiary, TelstraClear, has been cleared by the country's regulator, the Commerce Commission.

Telstra agreed in July this year to sell TelstraClear to Vodafone for $660 million in cash, but the deal depended on regulatory approval, which was delayed three times until it was finally released this morning.

In assessing the takeover application, the Commission considered the extent to which Vodafone and TelstraClear currently compete with one another, and if the loss of that rivalry would lead to a substantial lessening of competition, a test required under New Zealand's Commerce Act.

This is not the case, according to the Commission.

"In reaching its decision, the Commission considered that the merged entity would continue to face competition from Telecom, as well as Orcon, Slingshot and other smaller businesses in providing fixed line voice and broadband services to residential and small business customers,” commission chair Dr Mark Berry said.

However, the Commission stopped Vodafone from acquiring all of TelstraClear's spectrum holdings.

The amount of spectrum removed from the deal is not yet known, but it will be transferred to Telstra, which can sell it to other telcos, the Commission said.

The commission did not publish its full written reasons for the decision, but said a public version will be available "as soon as practicable" on its website.

Vodafone CEO Russell Stanners will be in charge of the merged company, which will phase out the TelstraClear brand over the next year and a half.

Whether or not a role will be available for the TelstraClear chief executive, Dr Alan Freeth, remains to be seen.

In a media statement, Stanners said the two companies will operate as two separate business units initially. Customers will be notified of the takeover in the coming two weeks, he said.

Vodafone is the dominant mobile telco in New Zealand, with some 2.4 million connections compared to Telecom's 1.6 million and 2 Degrees one million.

TelstraClear is only minor player in the mobile sector with around 50,000 connections, but it brings 200,000 Internet service and 270,000 landline customers to the table, giving the new entity under Vodafone a third of the country's total market share

The chief executive of the Telecommunications Users Assocation of New Zealand (TUANZ), Paul Brislen, said on his blog that "market dominance is now effectively in the hands of two players — elecom and Vodafone."

"TUANZ would have liked to see some kind of additional monitoring put in place to assure customers that no cosy duopoly could emerge," Brislen wrote.

"Presumably the Commission felt either it couldn't impose such a regime or that the existing market monitoring was enough".