RealTime IT News

Regulator to Investigate Telstra's OzEmail Buyout

The Australian Competition and Consumer Commission (ACCC) Monday said it is set to examine telecommunications carrier Telstra's AUS$300 million (US$198 million) purchase the consumer division of the country's largest ISPs, OzEmail.

"The ACCC will consider today's information and make further market inquiries into the possible impact of the proposal before making a decision about any intervention," said Acting ACCC Chairman Rod Shogren.

OzEmail was one of Australia's first ISPs and quickly built a strong market presence. In 1999 it was acquired by MCI Worldcom and the US company's clear intentions are to concentrate on OzEmail's corporate bandwidth business. As part of this strategy, MCI Worldcom also sold off Interline, which was OzEmail's internet telephony venture.

Under the terms of the exclusive Heads of Agreement purchase, OzEmail will operate as a wholly owned Telstra subsidiary. It will operate as a stand alone business with its own Board, brand, operations and network.

With the OzEmail purchase and its own Big Pond business, Telstra's subscriber base will double to 840,000, which is roughly 40 percent of Australians connected to the Internet.

OzEmail will have to continue to meet growth targets under the five-year agreement for Telstra to purchase network services from MCI WorldCom-owned ISP UUNET. MCI WorldCom purchased OzEmail in February last year for AUS$520 million (US$343.2 million).

According to the companies, OzEmail customers will continue to receive the same network services provided by MCI Worldcom's subsidiary UUNET. These services include Internet access, connectivity, backbone services and core managed services such as mail, news, file transfer protocol (FTP).

The proposed purchase is now subject to further negotiation between the Telstra and UUNET boards, as well as approval by the ACCC, before it can be finalised.