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Telstra's takeover bid for Adam falls through

The rumoured AU$60 million takover of Adam Internet by Telstra will not go ahead after concerns were raised by the competition watchdog.
Written by Josh Taylor, Contributor

Telstra's proposed acquisition of Adelaide-based ISP Adam Internet will not go ahead after the telcos failed to address concerns held by the Australian Competition and Consumer Commission (ACCC).

In October last year, Telstra had signed a deal rumoured to be worth up to AU$60 million to buy out the South Australian ISP to turn it into a national Jetstar-like budget ISP to target the low-cost sector of the market where BigPond can't currently compete.

Telstra's competitors, including iiNet, Macquarie Telecom, Vodafone, and Optus, all raised concerns with the regulator that because Telstra is the wholesale owner of the fixed copper network in Australia, it would offer a better price to Adam than it does to its retail competitors.

The deal needed the approval of the ACCC in order to go ahead, but chair Rod Sims said in December that the deal could result in a substantial lessening of competition in the fixed voice and broadband retail market in Australia.

"This is because Telstra would have the ability and incentive to use its market power in wholesale markets to favour the Adam Internet business over its other wholesale customers, which is likely to foreclose competition in the relevant downstream retail markets," he said at the time.

The deal would also lessen competition in South Australia, where the takeover would increase Telstra's market share in the state from between 40 and 45 percent up to between 55 and 60 percent.

In January, the ACCC delayed a decision on the proposed takeover indefinitely on the request from Telstra to attempt to address these issues, but today the company's chief customer officer Gordon Ballantyne said that by the end of the contractual end date for the Telstra-Adam deal at the end of June, the company had not been able to secure approval from the ACCC.

"We are very disappointed by this outcome. We believe this transaction would have provided real benefit to Australian consumers and would have added new competition into the broadband market," Ballantyne said in a statement.

The contractual end date had not been previously disclosed, and earlier this month both Telstra and Adam Internet had told the Australian Financial Review that discussions were ongoing, and no deadline had been set for the deal.

It is expected that Telstra will forge ahead with plans for a budget ISP under a different brand name to BigPond in the future. A spokesperson for Telstra told ZDNet that the company was looking at its options.

"Our focus is on continuing to provide more choice and better service for our broadband customers and we’ll continue to look at options," he said.

Other ISPs had approached Adam Internet prior to the Telstra deal, and had been interested in buying out the ISP, and it has been reported that other ISPs would still be interested in buying Adam Internet now that the Telstra deal has fallen through.

Adam Internet chairman Greg Hicks had not responded to a request for comment at the time of writing.

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