Trading Room home page

ACCC concerned by Telstra's Adam takeover

Market watch top headlines

Australian reports

World reports

Stocks to watch

BHP, WHC, PMV, QAN, SAI, YOW,

AAP

2012-12-20

The competition watchdog says Telstra Corporation's proposed acquisition of the smaller Adam Internet would reduce competition in phone and internet services.

Telstra wants to buy South Australia's Adam Internet and turn it into a national no-frills broadband company with lower-cost products, offering Telstra a two-brand strategy in the market.

The Australian Competition and Consumer Commission (ACCC) said on Thursday the deal was likely to result in a substantial lessening of competition in the supply of retail fixed voice and broadband services.

"This is because Telstra would have the ability and incentive to use its market power in wholesale markets to favour the Adam Internet business over its other wholesale customers," ACCC chairman Rod Sims said in a statement on Thursday.

This was likely to "foreclose competition in the relevant downstream retail markets", Mr Sims said.

The ACCC said its concerns were not addressed by Telstra's structural separation undertaking and migration plan, part of its deal with the federal government for the implementation of the national broadband network.

Those measures would not apply in an effective or appropriate way to Adam Internet, the ACCC said.

"The ACCC also notes that Adam Internet appears to be a strong competitor in the market for retail fixed broadband services in South Australia and is concerned that the proposed acquisition may reduce the levels of competitive tension for the supply of these services in this state," Mr Sims said.

Telstra's competitors, such as iiNet, Vodafone, Macquarie Telecom and Optus, had all written to the ACCC opposing Telstra's acquisition of the South Australian-based Adam.

The ACCC expects to make a final decision on February 7, and has asked for more submissions before January 24.

Telstra said it would "continue to constructively engage with the ACCC regarding the proposed purchase of Adam Internet".

The company's shares were steady at $4.34.