The parties could yet adjust the proposed agreement or appeal to the Federal Court, for which success would mean meeting a high legal threshold
The competition authority’s decision has been upheld: The Australian Competition Tribunal (ACT) has decided to uphold a ruling of the Australian Competition and Consumer Commission (ACCC) to block a regional infrastructure sharing deal between Telstra and TPG Telecom. Under the 10-year agreement, TPG would have been able to increase its 4G population coverage to almost 99% by gaining access to some of Telstra’s mobile network assets, while in exchange Telstra would have access to TPG’s spectrum within a defined geographical area. Despite the purported benefits for energy consumption, opex and capex, Optus called on the ACCC to prohibit the proposed deal, arguing it would overturn 30 years of regulatory policy that has promoted competition and investment in the country’s telecoms sector. Optus stated that allowing the transaction to proceed would strengthen the position of Telstra and make the market structure tend towards a monopoly, leading to material consumer and public detriment.
The deal would harm competition, investment and consumers: On 30 September 2022, the ACCC released a Statement of Preliminary Views, summarising issues raised during initial consultation with stakeholders and outlining its provisional position on the proposed agreement based on different counterfactual scenarios. Among other things, the ACCC considered that the transaction would result in an immediate improvement in the quality of TPG’s product and an increase in its cost of providing services, both of which would incentivise TPG to raise prices in the future. Having reflected on the ACCC’s preliminary expectations for price- and infrastructure-based competition, on 1 November 2022, Telstra and TPG offered two draft, court-enforceable undertakings. However, these were not deemed sufficient to address the regulator’s concerns nor would they meet its competition or public interests tests. On 21 December 2022, the ACCC decided to block the Telstra/TPG deal, which it determined would raise barriers to entry and expansion, reduce investment incentives and harm consumers in rural Australia.
A last roll of the dice?: Vicki Brady (CEO, Telstra) stated that the decision was a “massive missed opportunity” that would have enabled a better use of the country’s spectrum resources, while Iñaki Berroet (CEO, TPG) added that the ACCC ignored “overwhelming evidence” from experts and that the agreement would have exerted downward pressure on mobile prices. Both operators quickly contested the ACCC’s determination; however, on 20 June 2023, the ACT upheld the decision, concluding that the transaction would have further increased Telstra’s already strong position in wholesale and retail mobile markets, while reducing Optus’s incentives to invest in 5G and weakening the long-run competitive pressure imposed on Telstra by Optus. Following this judgment, the parties have a number of possible courses of action, including abandoning or reshaping the proposed deal, and advocating policy reform. They may also appeal to Australia’s Federal Court, although this judicial review would require them to demonstrate that the ACT had made a legal error, rather than enabling a challenge to the merits of its ruling.
