ACCC APPROVES VOCUS' TAKEOVER OF NEXTGEN

VOCUS Communications' proposed $807 million takeover of Nextgen Networks has been approved by the Australian Competition and Consumer Commission (ACCC).

The purchase has come under close scrutiny, as Nextgen is the only remaining wholesale provider of communications infrastructure in the country that has not been vertically integrated.

ACCC chairman Rod Simms (pictured) says there was very little concern raised by the market about the proposed acquisition.

"Small broadband providers say they are not generally reliant on Nextgen to be able to compete," says Sims.

In addition, excess capacity in the system provides an incentive for the major players to sell bandwidth smaller operators.

Post-acquisition, Vocus plans to expand its connection points to the National Broadband Network (NBN) from 68 to 112 of a possible 121.

The company says that this will provide additional wholesale options for smaller broadband providers and will also offer access to a broader bundle of products.

Sims says the ACCC will continue to watch the communications space closely, particularly given the recent consolidation in this market.

"The four largest retail service providers (Telstra, Optus, TPG, and Vocus) supply over 90 per cent of broadband services in Australia. Any future potential mergers or acquisitions that increase concentration can expect to receive close examination from the ACCC," says Sims.

In February 2016, Vocus acquired the M2 Group, which includes Primus and Dodo, giving it a significant retail presence.

Nextgen owns a national 'backhaul' fibre network of around 17,000km, connecting mainland capital cities and major regional centres around Australia.

Vocus also gains control of the Australia Singapore Cable and North West Cable System developments being undertaken by Nextgen as part of the takeover.

The takeover is being funded by a retail ($452 million) and institutional ($200 million) share placement, plus existing debt facilities.

Vocus Communications' share price has dropped from $8.422 on the day of the takeover announcement on 29 June, to $6.09 at opening this morning.