The Independent Consumer and Competition Commission today approved Telstra Corporation Limited to proceed with its proposal to acquire Digicel (PNG) Limited and its wholly-owned subsidiaries in PNG.
ICCC Commissioner and CEO, Paulus Ain said while acknowledging that Telstra is one of the four big telecommunication operators in Australia, the ICCC has concluded that this Proposed Acquisition is not likely to have the effect of substantially lessening competition in any markets Digicel is currently operating in PNG, because Telstra has but very limited presence in PNG markets.
Mr Ain said the ICCC therefore decided to allow Telstra to acquire Digicel PNG and its subsidiaries.
“The ICCC conducted extensive public consultation on this application,” Mr Ain added.
“This included consultation on the application when it was received and registered, the issue of a Draft Determination to Telstra and all key stakeholders for their comments; and a Conference held on the Draft Determination where all relevant stakeholders were allowed to attend and give oral comments on issues and facts the ICCC assessed in its Draft Determination.”
“It is important to inform the public that key institutions like NICTA, Department of Information and Communication, Institute of National Affairs, among others agreed with the ICCC’s draft decision to approve the proposed transaction.”
Mr Ain added that the institutions that made strong objections are PNG DataCo, Telikom and PNG Think Tank Group.
“All comments and views expressed were deliberated by the ICCC to arrive at this decision to approve.”
Mr Ain said that in its consideration of the likely effects on competition, if the Proposed Acquisition proceeds, the ICCC has in summary, formed the following conclusions:
- Firstly, the Proposed Acquisition is just a replacement of Digicel PNG because Telstra is not a PNG-based operator and is not activity competition in any given markets where Digicel is currently operating. Therefore, after the acquisition, Telstra will inherit and assume the current market position of Digicel PNG in all relevant areas of Digicel’s business operations in PNG.
- While the ICCC also understands that Telstra has several PNG telecommunication licenses from NICTA, it does so in order to operate its business in PNG such as its supply of telecommunications services to its business and enterprise customers. There is no information suggesting that Telstra competes for customers in PNG, or absent the acquisition, is likely to do so in the future.
- The above conclusion meant that the Proposed Acquisition is less likely to have any significant adverse effect on the current level of competition in any markets where Digicel currently has presence.
- While the telecommunication industry in PNG is a highly concentrated market, since the acquisition is basically a replacement of Digicel PNG, the current level of concentration will not be affected, post-acquisition.
- The ICCC accepts that Telstra is a vertically integrated telecommunications operator (as it provides upstream IP transit services to PNG based customers like DataCo and the mobile carriers).
However, the ICCC is of the view that there is sufficient level of competition at the upstream IP Transit service to put competitive pressure on Telstra’s potential foreclosure attempts. Available information also suggests that PNG-based customers are able to negotiate the rates offered by Telstra; and there is fewer switching costs.
Mr Ain further stated that while the ICCC also notes stakeholders’ comments on protecting the consumers’ interests, the ICCC was of the view that such vigorous competitors like Telstra will put competitive pressure on other existing and potential competitors to innovate and bring affordable telecommunication services to the market. When such happens, consumers ultimately benefit.
“The ICCC Act requires that if the ICCC is satisfied that a proposed acquisition which is subject of a Clearance application would not have, or would not be likely to have, the effect of substantially lessening competition in a relevant market, the ICCC must give a clearance; and vice versa.”
“In this case, the ICCC was satisfied that the acquisition of Digicel PNG by Telstra is not likely to result in substantial lessening of competition in any relevant markets. Basically, Telstra has passed the Clearance Test, hence the acquisition must be approved.”