Vodafone cleared to buy TelstraClear

20:20, Oct 29 2012

The Commerce Commission has cleared Vodafone New Zealand’s proposed purchase of TelstraClear.

The commission said it did not find any significant business overlap between Vodafone and TelstraClear in the provision of either mobile phone services or fixed line services to large businesses.

Chairman Mark Berry said the merged entity would continue to face competition from Telecom, as well as Orcon, Slingshot and other smaller businesses in providing services to residential and small business customers.

As a result, the commission was satisfied that the proposed acquisition would be "unlikely to substantially lessen competition in any of the relevant markets", he said.

The Overseas Investment Office said in a separate announcement that it had also approved the takeover.

The $840 million takeover, which surprised pundits when details were leaked in July, is set to recast the telecommunications industry and create a merged business with 3200 staff and annual revenues of $2.4 billion.


Telecommunications Users Association chief executive Paul Brislen said yesterday that the lobby group had thought long and hard about the ramifications but was hopeful the takeover could lead to a more "dynamic and interesting" market.

"On the one hand we have a reduction in competition as our top-three telcos become two."

But the upside to the deal was it would finally create a competitor that could "take on Telecom in the fixed line market", he said.

The merged firm will have about a 29 per cent share of residential broadband connections, versus Telecom's 49 per cent.

Gartner, IDC and Australian analyst Paul Budde have all speculated the sale of TelstraClear could clear the decks for parent Telstra to take a tilt at Telecom at some time in the future.

However, no such move could be imminent as a "non-compete clause" which was agreed as part of the terms of the acquisition will prevent Telstra re-entering the New Zealand market for an undisclosed period, believed to be between two and five years.

Vodafone chief executive Russell Stanners said in July that while there would be job reductions from pooling "back office functions" such as legal services, the merger would not result in mass redundancies among Vodafone's 1900 staff or TelstraClear's 1300 employees.

The company's Australian sibling, Vodafone Hutchison, yesterday announced it would axe 500 jobs - 10 per cent of its total staff - as part of a cost-cutting drive. But Vodafone New Zealand spokeswoman Sarah Newcombe said the Australian restructure was "specific to that business" and had no bearing here.

Vodafone anticipates TelstraClear would probably continue to operate as "standalone" businesses for about six months after the merger. The full integration of the companies - under the Vodafone brand and Stanners' leadership - would probably take a further 18 months.