One NZ-Dense Air deal greenlit, UK watchdog hits $116m Serato deal on eve of NZ decision

One NZ chief executive Jason Paris said acquiring Dense Air's 5G spectrum would be "like adding an extra lane on the motorway". Photo / Michael Craig

One controversial tech deal gained regulatory clearance overnight - but a second faced complications on the eve of the Commerce Commission’s decision.

The ComCom has granted clearance for One NZ (formerly Vodafone) to buy Dense Air NZ, a small firm (owned by Dense Air UK and Softbank) that controlled big chunks of 5G spectrum. Chief executive Jason Paris said acquiring the extra airwave capacity would be “like adding an extra lane on the motorway”.

2degrees argued the deal would give One NZ control over too many 5G-friendly airwarves, denting competition with Paris’ firm controlling more “road”, to extend his analogy.

One NZ countered that there had been nothing to stop 2degrees (co-owned by Australia’s largest superannuation fund and the deep-pocketed Macquarie) from bidding in what it called an open sale process. Acquiring the spectrum would put it on a par with Spark.

spectrum holdings

The watchdog sided with One NZ. Chairman John Small said the ComCom considered the counterfactual (regulator-speak for an alternative scenario) where 2degrees bought Dense Air’s spectrum.

“We do not consider that the acquisition is likely to substantially affect 2degrees’ competitive effectiveness,” Small said. After acquisition, One NZ would still “face significant competition from other retail mobile and broadband providers”.

The UK-based Dense Air entered the NZ market in 2018 when it paid US$17.5 million (then NZ$25.75m) to acquire two 35MHz blocks of 2.6GHz radio spectrum from two parties: Cayman Wireless, a subsidiary of Canada’s Craig Wireless (a firm associated with the later days of failed Auckland wireless internet provider Woosh Wireless) and Blue Reach, owned by rich lister and CallPlus founder Malcolm Dick.

Infratil-owned One NZ did not put a price tag on its pending deal. But with 5G network upgrades now well under way, and an ever-growing thirst for mobile data, it could be north of the $25.75m that Dense Air paid.

UK watchdog: Fight for your right to party

Meanwhile, the UK’s regulator says that after completing a “Phase One Investigation” it has uncovered several potential issues with a plan by Japan’s ATC (owner of the Pioneer DJ brand) to buy Auckland-based Serato for around $116m.

The UK regulator’s May 1 statement comes on the eve of the Commerce Commission’s verdict, due May 8.

The regulator has already delayed its decision three times, but this morning a spokeswoman said: “We’re continuing to target May 8 and hope to communicate something publicly then”.

Serato makes consumer music software, and also dominates the market for the pro software used by multiple makers of DJ hardware - like the decks used to play tracks at nightclubs and parties.

If the deal goes ahead, it “Could see DJs paying more to keep partygoers entertained,” the UK’s Competition Markets Authority found.

CMA executive director Joel Bamford said:

• DJs and entertainers depend on having access to the best equipment and software in order to put on a good show.
• We’ve found this deal could substantially reduce competition in DJ software, resulting in increased prices, less innovation, and less choice.
• We’re also concerned it could negatively impact the hardware markets by allowing the combined business to leverage Serato’s leading software to harm its hardware competitors, ultimately affecting DJs and consumers.

The CMA has asked ATC to address its concerns.

The Serato deal was already looking in need of a remix.

In a February 8 statement of issues, the Commerce Commission said it was “not currently of the view” the deal met its benchmark for approval.

Serato was founded in the 1990s by Auckland University mates Steve West and AJ Bertenshaw (now AJ Wilderland), who remain its largest shareholders.

Read a backgrounder on the Serato deal, and the firm’s financials, here.

Chris Keall is an Auckland-based member of the Herald’s business team. He joined the Herald in 2018 and is the technology editor and a senior business writer.