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2015-03-27

seventh story

Then there were three: TPG makes bid for iiNet

In a move that promises to reshape the local telecommunications industry, fixed broadband provider TPG has made a bid for the current number three broadband operator, iiNet. 

If successful, it will create a company that will command the number two spot in this section of the market, relegating Optus to third place. Between them iiNet and TPG have around 1.7 million fixed broadband customers – nearly twice as many as Optus, which continues to make little headway in this area. 

Apart from creating headaches for Optus, the merger creates some interesting questions for policy makers. The move, if approved by the ACCC, will represent a further consolidation of the fixed broadband market at a time when a thousand flowers were supposed to bloom over the wholesale-only NBN. 

A major rationale for the NBN project was to encourage greater competition at the service level by creating a monopoly fixed network to which all service providers had access on equal terms. 

But as industry itself has been pointing out for some years now, the prices set by NBN Co for that access mean that smaller companies may struggle to survive.

Back in 2011, Internode founder, Simon Hackett warned that broadband service providers would need at least 250,000 customers to operate in an NBN world. Since then consolidation has continued, including the acquisition by iiNet of both Internode itself and Canberra-based TransAct the same year. 

Meanwhile, TPG has been buying up fixed networks, acquiring Pipe’s assets in 2010 and last year those of AAPT. 

iiNet founder Michael Malone is now predicting that there will only the three wireline internet service providers by the end of 2015, with the M2 Group the only one of the main players at present left to be absorbed.

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