14 Jul 2012

Vodafone seeks approval to buy Telstra

9:30 pm on 14 July 2012

In its latest step towards acquiring ownership of TelstraClear, Vodafone has written to the Commerce Commission seeking clearance.

The British-based mobile phone provider has bought the New Zealand arm of the Australian phone company for $840 million, in what could be the biggest shakeup in the telecommunications landscape in years.

Before approving the sale, the commission says it will look at how the merger will affect competition. The deal also requires approval from the Overseas Investment Office.

Telecommunications Users Association chief executive Paul Brislen says if it goes ahead, there will finally be a company big enough to give Telecom a run for its money.

"When you've got a market that's as skewed as the New Zealand telco market it's not a bad idea that we have another player that is of larger scale," he says.

Mr Brislen says Vodafone's purchase will give it fixed line and broadband assets which will make it a serious rival to Telecom.

The $840 million purchase price was more than analysts had expected but Vodafone says the savings it will make mean the price is worthwhile, and will allow it to compete with Telecom on an equal footing.

Chief executive Russell Stanners says Vodafone will have a much stronger presence in the phone and broadband market, which will complement its dominance in the mobile phone sector.

He says the company will have more capability to better meet the needs of business customers in particular.

Peter Wise of research company IDC says the seemingly high price probably reflects the value Vodafone is putting on acquiring TelstraClear's fibre-optic cable network to connect its cellphone sites.

He says the mobile traffic is growing strongly with the increase in smartphones and applications, so having a fibre backbone will set Vodafone up for the long term.

Telecom remains the dominant player in the New Zealand market, however. IDC estimates the combined Vodafone-TelstraClear company will have about 28% of the broadband market compared to Telecom's 51%, and 26% of the landline market to Telecom's 68%.

Mr Stanners says there will be no major job losses among the combined 3200 workers, with reductions restricted to corporate areas like legal and finance services.