eisa Also Waits for ACCC on OzEmail Takeover

Despite being characterised in the media as
the David who slew Goliath, Australian ISP eisa will have to wait for regulatory
approval before it successfully snatches rival OzEmail from the embrace of Telstra.

eisa confirmed widespread speculation this week that its trading suspension on
the Australian Stock Exchange last Friday was due to its announcement that
it had renewed its bid to buy the consumer ISP division of OzEmail for
around AUS$350 million (US$221 million).

eisa’s stock had jumped 30 per
cent in early trading on Friday as word leaked out that it would challenge
Telstra’s AUS$300 million (US$189 million) counter-bid.

The reason that Telstra’s bid has not been accepted was a very negative
assessment given by the corporate watchdog, the Australian Competition and Consumer
Commission, about its misgivings concerning the largest consumer ISP in
Australia taking over the second largest. However, the ACCC announced late
today that it would also scrutinise eisa’s proposal for anti-competitive
effects.

“Based on information that the ACCC has available to it, the proposed
acquisition would give eisa a market share in the region of 20 per cent in
the provision of retail Internet access services,” said Professor Allan
Fels, chairman of the Commission. “The ACCC intends to undertake market
inquiries into this proposed acquisition to determine whether it is likely
to substantially lessen competition in breach of the merger provisions of
the Trade Practices Act 1974.”

While there was little doubt that Telstra’s proposal had significant
weaknesses against the ACCC’s arguments, the outcome of the Commission’s
deliberations on eisa’s proposal is far less certain. eisa would become the
largest provider in Australia if it added OzEmail’s 350,000 customers to
its own 100,000 subscriber base, edging out Telstra’s 400,000 users.