ACCC greenlights Vocus’ NextGen Networks acquisition

Sufficient wholesale competition from Telstra, Optus and TPG, ACCC says.

The Australian Competition and Consumer Commission (ACCC) will not oppose a move by Vocus Communications to acquire Nextgen Networks. The proposed deal, unveiled in June and worth approximately $861 million, also includes the still-under-development North West Cable System and Australia Singapore Cable.

Vocus will acquire 100 per cent of Nextgen Networks as part of the deal. The company is set to pay $700 million for Nextgen Networks; US$80 million for NWCS as well as US$20 conditional on certain customer commitments; and US$20 million for ASC when construction commences.

After the acquisition Nextgen Group’s remaining asset will be data centre operator Metronode.

The ACCC said today that the services provided by Vocus and Nextgen were largely complementary, and where they overlapped there was likely to be sufficient competition in the form of wholesale services from Telstra, Optus and TPG.

Vocus last year merged with M2 to become Australia’s fourth largest telco.

“Vocus historically has focused on supplying communication services to small-to-medium sized enterprises in metropolitan areas,” the ACCC’s competition analysis stated.

“Following its acquisition of the M2 Group in February 2016, it is also a significant supplier of residential broadband services through brands such as Primus and Dodo. In contrast, Nextgen's business is primarily focused on supplying inter-city wholesale transmission services.

“The proposed acquisition results in some horizontal aggregation in relation to the supply of transmission services; network services; sub-sea transmission cables and broadband. However, the ACCC concluded that given the limited overlap, and the fact that Vocus and Nextgen do not compete closely in the areas in which they do overlap, it is unlikely that the proposed acquisition will substantially lessen competition in relation to the supply of any of these services.”

“While this proposed acquisition did not raise concerns, the ACCC will continue to keep a close watch on competition in the telecommunications industry especially given recent consolidation and increased vertical integration,” ACCC chairperson Rod Sims said in a statement.

“The four largest retail service providers (Telstra, Optus, TPG, and Vocus) supply over 90% of broadband services in Australia. Any future potential mergers or acquisitions that increase concentration can expect to receive close examination from the ACCC.”

“We are extremely pleased with the announcement from the ACCC and will move as quickly as possible to close the transaction and integrate the business under the Vocus umbrella,” Vocus CEO Geoff Horth said.

“We will be working to ensure that we leverage the benefits of our expanded infrastructure platform and increased scale across our customer base.”

Nextgen Networks has around 17,000 kilometres of fibre and connects to 70 data centres. Post-acquisition, Vocus will have fibre access to more than 5000 buildings (Nextgen runs fibre to 1164 buildings).

A previously mooted post-acquisition capex spend of an estimated $11.5 million will extend Vocus' coverage of NBN Points of Interconnect from 68 to 112 (out of 121 total NBN POIs).

Vocus CEO Geoff Horth
Vocus CEO Geoff Horth


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