Infratil could sell Trustpower if it was a barrier to owning Vodafone NZ

Friday, 17 May 2019

Infratil could sell its controlling stake in Tauranga power and broadband company Trustpower if the Commerce Commerce felt it was an obstacle to it buying Vodafone NZ, Infratil has told investors.

NZX-listed Infratil and Canadian company Brookfield revealed on Tuesday that they had agreed to buy Vodafone NZ from its British parent for $3.4 billion, and that Infratil planned a $400 million rights issue to help pay for its share of the purchase.

Infratil owns a 50.7 per cent stake in Trustpower, which had about a 5 per cent share of the broadband market last year, according to the commission, while Vodafone NZ had a 26 per cent share.

Infratil chief executive Marko Bogoievski said on Tuesday that he did not expect its stake in Trustpower would be a barrier to the purchase, but Infratil would seek clearance for the Vodafone NZ deal from the Commerce Commission to ensure it was 'in clear territory'.

The commission confirmed on Friday afternoon that it had received the clearance application, noting that 'Infratil (through Trustpower) and Vodafone overlap in the supply of telecommunication services to residential and business customers'.

**READ MORE:

Infratil boss Marko Bogoievski (left) and Vodafone NZ chief executive Jason Paris appear confident Commerce Commission clearance of the Vodafone NZ purchase is a formality, but Infratil could sell Trustpower if not.

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* Infratil looks to repeat the magic formula with Vodafone New Zealand

* Vodafone NZ sold for $3.4 billion to Infratil and Canadian investment firm**

Offer documents released by Infratil on Friday for its $400m capital raise reiterated that Infratil and Brookfield believed there was 'a very strong basis' for clearance to be granted, 'given the competitive nature of the fixed broadband market'.

Trustpower and Vodafone NZ would together have about a 31 per cent share of the broadband market, but barriers to entry under current policy settings are low.

But Infratil said that if the commission did not grant clearance, its acquisition agreement with Vodafone Group would require Infratil to sell its interest in the Vodafone transaction 'or failing that divest its stake in Trustpower by an 8 month deadline'.

Commerce Commission clearance could also be satisfied if Trustpower had sold its retail business in the required time, the offer document noted.

Barriers to entry in the broadband market are demonstrably low under current policy settings, with businesses such as Stuff Ltd and Nova Energy among newer entrants.

That would normally be expected to make regulatory intervention in the Vodafone NZ purchase less likely.

The retail market could potentially become less competitive if the commission regulated access to Chorus' raw fibre-optic network at prices that advantaged bigger retailers that were able to make larger infrastructure investments.

The commission could also potentially consider whether the purchase of Vodafone might reduce the likelihood that Trustpower would provide more competition in the mobile market.

But Bogoievski said on Tuesday that he expected any focus the regulator had would be on fixed-line broadband.

Infratil's offer documents said Infratil and Brookfield would each own 49.9 per cent of Vodafone NZ, assuming the deal proceeded, with the balance of shares owned by Vodafone NZ executives.