The Australian Competition and Consumer Commission (ACCC) is concerned that eisa's share - now 20 per cent - in Australia's Internet service provider market may negatively affect competition.
Internet service provider eisa recently announced it is acquiring OzEmail in a $300-350 million deal which will see it become the number one ISP in Australia.eisa CEO Damien Brady said the combined organisation is expected to have in excess of 400,000 customers, knocking Telstra Big Pond from the top spot as Australia's largest ISP and increasing competition in the marketplace.
"Number two and number four have joined forces to take on number one," Brady said. "We will move quickly to take on Telstra."
The ACCC said the acquisition lifts eisa's market share to 20 per cent in the retail Internet access market and is concerned about the effects this will have on competition.
"The ACCC intends to undertake market enquiries into this proposed acquisition to determine whether it is likely to substantially decrease competition in breach of the merger provisions of the Trade Practices Act 1974," Professor Allan Fels, ACCC's chairman, said.
However, whilst admitting eisa's acquisition of OzEmail is "certainly very large", Brady stated eisa would not close the door to other prospectivepartners. "If other opportunities exist to pursue, then we will," he said.
The ACCC will use information it gathered in its investigation into Telstra's proposed acquisition of OzEmail to determine the impact of the eisa/OzEmail merger.
Telstra's $300 million bid for OzEmail, announced in January, was viewed unfavourably by the ACCC, which stated that the merger would lessen competition. eisa's prized purchase of OzEmail may yet be railroaded by more than the ACCC, with funding arrangements for the acquisition still being finalised.
Robert Crossman, head of investment banking at eisa's financial advisor Hartley Poyton, said the company was considering a number of options, including the involvement of strategic investors to pay for the multimillion dollar deal.
According to Brady, the two companies will continue to use existing brand names in the short term, with OzEmail being the core brand.
"OzEmail is a significant brand and we would like to see that brand continue . . . we will let the customers choose what brand they prefer," he said.
Meanwhile, eisa has further announced a strategic alliance with Vodafone Australia for the implementation and development of WAP (wireless applications protocol) services and applications.
Under the deal, Vodafone customers will gain access to eisa's ISP services (including OzEmailservices) such as news content and e-commercesolutions.
In return, eisa/OzEmail customers will be pro-vided with WAP services, bundling opportunities and wireless content.
Andrew Bissex, managing director of Vodafone, said WAP services are likely to introduced by Vodafone later this year, but could not detail any services.
Bissex said Vodafone had been in discussion with eisa for sometime, but the acquisition of OzEmail made the Internet company a "more attractive" partner.
Despite having a non-exclusive deal with eisa, Bissex said Vodafone is "unlikely" to form partnerships with other ISPs.
"[eisa's acquisition of OzEmail] is so powerful we will be trying to execute as much as possible from it," he said.