ACCC looks at TPG/iiNet deal

Australia's corporate watchdog has launched an inquiry into TPG Telecom's planned $1.6 billion takeover of iiNet, after saying the deal may lead to a substantial lessening of competition.

The Australian Competition and Consumer Commission wants more information about whether the proposed tie-up will lessen competition in the retail fixed broadband sector.

If the merger is successful, the combined company would become Australia’s second-largest internet provider, with 27 per cent of the market share for fixed broadband.

That would put it behind only Telstra, which currently holds 41 per cent of the market share.

"The ACCC is exploring the extent to which the acquisition of iiNet will reduce competition by reducing the likely competitive tensions in respect of pricing, innovation and service quality," chairman Rod Sims said.

"The ACCC is also considering whether the competitive constraint posed by the remaining competitors, namely Telstra, Optus, M2 Group and the much smaller market participants, would be sufficient to prevent a substantial lessening of competition in the supply of fixed broadband services."

In the statement of issues, the ACCC said iiNet was an important competitor in the market for supply of retail fixed broadband services and had a strong focus on customer service.

“The ACCC’s preliminary view was that the acquisition of iiNet may lead to a substantial lessening of competition, potentially resulting in higher prices and/or degradation of the non-price offers available in the market, including customer service,” the ACCC said.

However, it also said that the proposed takeover was unlikely to materially alter the level of competition in the market for the supply of wholesale data transmission, as well as the supply of retail fixed voice, mobile voice, mobile broadband and subscription television services.