TelstraClear sale: Has Vodafone paid too much?

TUANZ warns of cosy duopoly if sale goes ahead

IDC telecommunications analyst Peter Wise says the price Vodafone is paying for TelstraClear - $840 million – seems a little high.

Telstra announced it will sell its New Zealand subsidiary TelstraClear this morning, although the sale is subject to approval by three government agencies.

Wise suggests the price may be high because there is cash on the balance sheet, but he stresses this is only speculation.

He says both parties appear to have navigated spectrum concerns. Each is limited to 25MHz but Telstra in Australia will retain 5MHz so Vodafone won’t exceed its cap.

Meanwhile TUANZ CEO Paul Brislen warns that the sale could lead to a “cosy duopoly” in the telecommunications market between Vodafone/TelstraClear and Telecom.

“I'm very hopeful that this is a good thing [the sale] but the danger of the cosy duopoly must be considered," he says.

"On the one hand it gives us a real competitor to Telecom for the first time ever - Vodafone and TelstraClear combined have a fixed line market of about 30 percent - still a long way short of Telecom but far stronger than any other player. The danger is that they become a cosy duopoly, carve up the market and sit there without competing properly.

“I'd hope that Vodafone has learned from Telecom's mistakes and won't go down that track - it would be disastrous if we ended up having to regulate a future Vodafone the way we have Telecom.

Brislen says the impact of the sale will affect will be felt by FX Networks in the national backhaul market and 2degrees in the mobile market.

“The real concern should lie around FX Networks and 2degrees and how they respond in their respective markets - both now face two large, integrated competitors and how that shakes out will be very telling.”