Vocus NZ tells regulator merger with 2degrees will enhance competition

Vocus NZ tells regulator merger with 2degrees will enhance competition

Improved cashflows and balance sheet will support the cost of 2degrees' 5G network roll out, Vocus argues.

Mark Callander (Vocus NZ)

Mark Callander (Vocus NZ)

Credit: Supplied

Voyage Digital, a subsidiary of ASX-listed Vocus Group, is arguing its proposed merger or Vocus NZ and 2degrees will enhance rather than detract from competition.

The merger would bring together Vocus NZ’s and 2degrees' "highly complementary" assets and infrastructure across mobile, broadband and fixed-line services, as well as a shared challenger mindset, to create an integrated fixed-mobile business of scale.

The deal would deliver better mobile and fixed services to customers and enhance choice, Voyage Digital argued in a submission to competition regulator the Commerce Commission.

In the middle of last year, 2degrees' owner Trilogy International Partners had been shaping up to list the telco separately but then entered negotiations with Vocus. The proposed deal was announced on the Toronto Stock Exchange, where 2degrees' owner is listed, on New Year's eve NZ time. 

The deal would enable the combined companies to offer more competitive service bundles of existing services as well as to bundle new products and services, particularly to business customers, the submission argued.

"Both Parties currently have separate but complementary focuses. Vocus NZ’s strength is in its broadband offering to customers, with minimal presence in mobile. In contrast, 2degrees is stronger as a mobile provider, with less of a presence in broadband."

A more powerful number three player would compete with Spark and Vodafone New Zealand, which will remain the number one and two significantly larger players respectively.

"Despite having a lower market share in mobile, 2degrees has built a mobile network of similar scale and reach to Spark and Vodafone," the submission said. "In order to support the rapidly increasing data demand across its network, 2degrees therefore has to support an increasing cost base to maintain network parity from a lower revenue base. 

"The improved cashflows and balance sheet of the merged entity will better support the capital programme of the 5G network roll out compared with the counterfactual."

Vocus pointed out that the Commerce Commission had already found that the barriers to switching mobile suppliers had been reduced and that most consumers found switching to be easy.

"As a result, the merged entity will be constrained post acquisition from increasing prices or reducing quality of services by the countervailing power of customers through their ability to switch providers," the submission said.

Similarly, service resellers or "mobile virtual network operators" would also have choice between three strong network suppliers.

If the proposed merger did not go ahead, Vocus NZ and 2degrees were both likely to proceed with separate public offerings of shares in their respective New Zealand businesses.

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Tags mobilebroadbandTelecommunicationsVocusOrconVodafone New Zealand2degreessparkVoyage Digital



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