New Zealand’s competition body has given the go-ahead for a merger between 2degrees and Vocus, creating a stronger third player in the country’s telecoms market.

The Commerce Commission revealed on Tuesday that it is happy for the tie-up to go ahead, noting that it will not lessen competition in the sector, despite the fact that it will see the market’s third mobile network operator subsume its largest MVNO.

Aside from building a little scale in the mobile market, the deal will also add Vocus’ fibre prowess into the mix. The company’s legacy is in business, government and wholesale services, but it also has a presence in consumer broadband, particularly at the low-cost end of the market. Essentially, the merger positions the new company (Vocus is to all intents and purposes the buying entity, but it’s not clear whether a rebrand is on the cards) as a more credible competitor to the big two: incumbent Spark and Vodafone.

The regulator clearly didn’t have too many concerns to examine, its approval coming less than three months after the telcos announced their merger plan. It has yet to publish its full findings, but its initial statement tells us all we need to know.

“The focus of our enquiries was on wholesale and retail competition in broadband and fixed voice and mobile services. The evidence before us indicates that the merged entity will continue to face strong competition from existing competitors, including Spark and Vodafone,” said Sue Begg, deputy chair of the Commerce Commission.

On the mobile aspect specifically, “we do not consider the transaction will significantly change the incentives of network operators to grant access to MVNOs,” she added.

So, it appears the deal will go ahead. Under the terms of the transaction announced on the last day of last year, investment group Macquarie, which owns Vocus, will acquire 100% of 2degrees from Trilogy International Partners and Tesbrit for an undisclosed sum. Macquarie acquired Australia-based Vocus last year after becoming the group’s fifth suitor in four years, and split off its New Zealand arm to create Orcon. Technically, Orcon is the company merging with 2degrees.

“This transaction marks a step change in the New Zealand telecommunications landscape and will establish a stronger player in market, and this will lead to more competition and benefits to end users,” said Orcon chief executive Mark Callander, in a statement, late last year. “By bringing together two great Kiwi businesses with complementary assets and a shared challenger mindset, exciting growth opportunities can be realised.”

The numbers suggest that the merger will indeed boost competition, at least in the fixed space.

Vocus and 2degrees together had a 20% share of the fixed broadband market in 2020, according to the latest data published by the Commerce Commission just under a year ago. That puts them almost on a par with Vodafone at 21%, although still some way behind Spark’s 40%. The shape of the mobile market will remain much the same; together New Zealand’s MVNOs claim just 1% of the market. Last year’s numbers put Vodafone and Spark neck and neck, each serving 40% of the market, and 2degrees some way behind with 19%. The biggest change is arguably for Spark, which currently hosts Vocus’s MVNO service. It seems unlikely the merged entity wouldn’t look to bring that in house at some point.

A stronger fixed broadband business will support the merged entity’s mobile operation, and cross-selling opportunities will naturally increase. Doubtless we’ll hear more from the new entity once the deal closes. In December, they were shooting for completion in the first half of 2022, subject to regulatory clearances.

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