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ComCom grants clearance for Vocus, 2degrees merger

The Commerce Commission has granted clearance to a transaction that would see the merger of the Vocus Group with 2degrees.

In reaching its decision, the Commission says it took into consideration the potential impact of the proposed merger on competition in retail and wholesale telecommunications markets, but Deputy Chair Sue Begg said the Commission was satisfied that the merger is unlikely to substantially lessen competition in any New Zealand market.

"The focus of our enquiries was on wholesale and retail competition in broadband and fixed voice and mobile services," Begg says.

"The evidence before us indicates that the merged entity will continue to face strong competition from existing competitors, including Spark and Vodafone.

"While the transaction will result in the vertical integration of 2degrees' mobile network with the largest mobile virtual network operator (MVNO), Vocus, we do not consider the transaction will significantly change the incentives of network operators to grant access to MVNOs."

Speaking to the Commission's decision, both Orcon Group and 2degrees welcome today's statement.

“We are pleased to receive Commerce Commission clearance, which is the first step in the regulatory approval process for the merger of Orcon Group and 2degrees,” CEO Orcon Group and named CEO of the merged entity, Mark Callander, says.

“This outcome recognises that the merger will enhance competition and provide benefits to Kiwis and Kiwi businesses.

“The combined offering of Orcon and 2degrees positions the business as a strong third player in the New Zealand telecommunications industry.

“Under the 2degrees brand, Kiwis will have access to mobile, fixed-line, and wireless broadband services as well as competitive energy services.

“While we await further regulatory approvals, both companies continue to drive their businesses forward, delivering quality services and support for all customers.

The decision comes after the Commerce Commission called for public submissions on the likely competitive effects of the proposed merger between 2degrees and Vocus.

The proposed transaction involves a newly incorporated Vocus Group company, Voyage Digital (NZ) Limited, acquiring all of the shares of Orcon Holdings Limited - formerly known as Vocus (New Zealand) Holdings Limited - and then acquiring all of the shares in Two Degrees Group Limited from its shareholders, Trilogy International New Zealand LLC and Tesbrit B.V.

The Commission published a statement of preliminary issues on the proposed merger, outlining the key competition issues that the Commission considers necessary in deciding whether to grant clearance to the proposed merger.

Additional factors taken into consideration were the closeness of competition, the degree of constraint that Vocus NZ and 2degrees impose upon one another, and that would be lost with the proposed merger, as well as the degree of constraint that existing competitors would impose on the merged entity.

Furthermore, the Commission looked into how easily rivals can enter or expand, whether the proposed merger was likely to result in a reduced price, quality or innovation in the relevant retail markets, noting that both merger parties have in the past been drivers of such differentiation.

The Commission said it was also interested in whether the proposed merger was likely to impact competition in any relevant wholesale markets, including on the merged entity's incentives to compete for wholesale customers in the future and the wholesale supply options that would remain available to access seekers (in both fixed-line voice and broadband services, as well as mobile).

Finally, the Commission considered whether any of the relevant retail or wholesale markets were vulnerable to coordination and whether the proposed merger would change the conditions in the relevant markets so that coordination was more likely, more complete or more sustainable.

A public version of the written reasons for the decision will be available on the Commission's case register in due course.

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