Telecom may be in box seat for Optus

SYDNEY - Comments by the head of Australia's competition watchdog have strengthened Telecom's position as a contender for the mobile assets of Cable and Wireless Optus.

Competition and Consumer Commission chairman Professor Allan Fels has indicated that a simple merger between Vodafone Pacific, a potential bidder, and Optus would be blocked.

Optus and Vodafone are ranked No 2 and No 3 respectively in the Australian mobile market, with 33 per cent and 18 per cent share.

Professor Fels said any simple acquisition by Vodafone would raise "extremely strong" issues under the Trade Practices Act because of the importance of the two companies in the mobile sector.

"Our starting position would be that Vodafone would be unable to acquire Optus in any simple sense," he said.

"Here and now, the market is largely Telstra, Optus and Vodafone, and, on the face of it, it would seem to restrict competition."

Professor Fels said competition between second and third-place players was "extremely important in gingering up competition" across the market.

The Sydney Morning Herald said Professor Fels' comments had put Telecom "firmly back in the picture as a serious contender."

While a number of names have been mentioned in relation to the planned restructuring of Optus, which is controlled by Britain's Cable and Wireless, only Telecom has so far made a formal submission to the commission.

The Australian Financial Review said Vodafone was believed to be making a "public interest" argument to the regulator.

The argument was understood to centre on a commitment to purchase third generation (3G) mobile spectrum in Australia and to develop associated network infrastructure.

But a Burdett Buckeridge Young analyst, Mark McDonnell, described bidding for Optus' mobile assets as "a race of one at the moment."

"There is no doubt that Telecom wants to become Telecom Australasia," he said. "I don't see any of the other alleged parties ... having anything that comes close to the same strategic intention."

- NZPA