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Infratil gets clearance to buy shares in Vodafone

BusinessDesk report by Rebecca Howard
Infratil’s plan to buy up to 50 percent of Vodafone New Zealand has been cleared by the Commerce Commission.

Infratil and Brookfield Asset Management sought Commerce Commission approval for their $3.4 billion purchase of Vodafone Group’s New Zealand business. One possible stumbling block had been Infratil’s controlling stake in Trustpower – a small competitor in the fixed broadband market.

Commission chair Anna Rawlings said the regulator was satisfied Infratil’s proposed shareholding in both Vodafone and Trustpower would not substantially lessen competition in any of the markets it assessed.

“While Trustpower has in the past been an aggressive competitor in residential broadband, with a particular focus on energy and broadband bundles, several other multi-utility providers have similarly emerged including Vocus, Nova Energy and Contact Energy,” she said. “2Degrees and Stuff are also competing effectively in the residential broadband market alongside Spark and MyRepublic.”

She said Vodafone and Trustpower are not currently each other’s closest competitors and even in regions where they would hold a high market share – such as Bay of Plenty and Wellington – “they will continue to face effective competition from several other national operators.”

Competition in mobile markets is generally driven by the three network operators and is therefore unlikely to be affected by Infratil’s acquisition, she said. “For these reasons, we are satisfied that the proposed transaction should be granted clearance.”

Trustpower is currently Infratil’s biggest asset, at $1.1 billion, followed closely by Canberra Data Centres at $841-$942 million and Wellington International Airport at $770-850 million.

Infratil’s planned purchase of Vodafone will transform its portfolio, with 76 percent of the post-acquisition assets being split equally between renewable energy and data and connectivity. Those two segments account for 48 percent and 22 percent of the portfolio currently. Infratil shares last traded at $4.68 and have gained 30 percent so far this year.

Press Release – Commerce Commission
The Commerce Commission has granted clearance for Infratil Limited to acquire up to 50% of the shares in Vodafone New Zealand Limited. Infratil is a Wellington-based investment company whose current interests include a 51% share of Trustpower Limited.

Infratil submitted that Vodafone and Trustpower would continue to operate as independent companies. While the Commission accepts this is likely, its analysis of the proposed acquisition was based on the conservative assumption that the businesses of Trustpower and Vodafone could be combined.

In reaching its decision, the Commission focused on the possible impact of the proposed acquisition in the national markets for the retail supply of broadband and mobile services.

Chair Anna Rawlings said the Commission was satisfied Infratil’s proposed shareholding in both Vodafone and Trustpower would not substantially lessen competition in any of the markets it assessed.

“While Trustpower has in the past been an aggressive competitor in residential broadband, with a particular focus on energy and broadband bundles, several other multi-utility providers have similarly emerged including Vocus, Nova Energy and Contact Energy. 2Degrees and Stuff are also competing effectively in the residential broadband market alongside Spark and MyRepublic,” Ms Rawlings said.

“As it stands, Vodafone and Trustpower are not each other’s closest competitors and even in regions where they would hold high market shares, such as Bay of Plenty and Wellington, they will continue to face effective competition from several other national operators.

“Consistent with the mobile market study preliminary findings, we consider competition in mobile markets is generally driven by the three network operators and is therefore unlikely to be affected by Infratil’s acquisition. For these reasons, we are satisfied that the proposed transaction should be granted clearance.”

A public version of the written reasons for the decision will be available on the Commission’s case registerin the near future.

Background

When considering a proposed merger, the Commission must determine whether any competition that would be lost with the merger would be substantial. Further information explaining how the Commission assesses a merger application is available on our website.

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