The TPG Telecom Ltd (ASX: TPG) share price is 4.73% higher at $4.76 after Australia's competition regulator green-lighted the telco's proposed $5.25 million sale of assets to Vocus.
The Australian Competition and Consumer Commission (ACCC) announced that it would not oppose TPG's sale of its fixed-line business, enterprise, government, and wholesale division, as well as its fibre and transmission networks to Vocus Group.
The ACCC found the sale would not significantly decrease competition in the marketplace.
Let's dig deeper.
TPG share price lifts as merger plans progress
Among the assets TPG wants to sell is its fibre network, including metropolitan, domestic, inter-capital, and international subsea cable systems and data centres primarily used for business, enterprise, government, and wholesale.
The telco also wants to sell its wholly-owned subsidiary, Vision Network.
This is a fixed-line broadband network that provides residential broadband services in selected areas of several major cities.
TPG also wants to offload its wholesale, enterprise, and government products and services division, which provides fixed-line fibre and fixed-line network services to wholesale, enterprise, and government customers under the TPG Telecom and AAPT brands.
Why did the ACCC give the green light?
The key question for the ACCC when considering any sale or acquisition is whether it will reduce competition in the marketplace.
Reduced competition is seen as bad for consumers. It reduces the choice of suppliers and can also lessen price competition.
Essentially, the ACCC found that TPG and Vocus served two different groups of customers.
ACCC Commissioner Dr Philip Williams said:
Overall, we did not find that the acquisition would likely result in substantially lessening competition in any market.
Our investigation found that Vocus concentrates on supplying large enterprise and government customers, whereas TPG focuses on the small and medium enterprise segment of the market.
After the acquisition, Vocus will continue to face strong competitors including Telstra, Optus, Aussie Broadband, Superloop and managed service providers in supplying government, large enterprise, and SME customers.
What did TPG management say?
In a statement, TPG Telecom CEO Iñaki Berroeta said the ACCC clearance marked an important milestone:
We are pleased to have passed this important regulatory milestone and are now focussed on completing the transaction later this year.
This transaction forms an important part of our strategy to simplify our business and accelerate and increase the streamlining of our operating structure and cost base.
The deal remains subject to approval by the Australian Foreign Investment Review Board and US regulators.
