UK call on Huawei matters to Australia, too

The British government will shortly decide whether to let Huawei into its 5G market, and the decision will have a big impact on the Chinese company’s ability to convince the federal government to open the door in Australia.

In August 2018, the federal government banned the company from supplying equipment in Australia on security grounds.

Huawei is making a last-ditch attempt to overturn the decision with the knowledge that if it doesn’t get in the door this year the game will be over.

Already one of its key customers, Vodafone, has signed a supply agreement with Nokia, and market leader Telstra uses Ericsson equipment.

Optus is using a combination of both and already has some 400 towers in 5G operation.

The fact some of this equipment is made in China doesn’t seem to bother the security officials who were behind the decision to follow the US ban on Huawei.

Next month, Federal Court judge Justice John Middleton is due to decide whether to overturn the ACCC ban on TPG and Vodafone merging, with most expecting him to do just that.

TPG had invested $1.3bn on its mobile rollout and claimed the Huawei ban was a reason why that rollout was halted and it decided to jump into bed with Vodafone instead.

How would that argument look if Britain let Huawei into its market and the federal government agreed to modify its 1998 decision?

TPG boss David Teoh told the court last year the game was over and he had missed his chance to get into it.

The ACCC argued he could change his mind, but Teoh rejected that line, saying his role was as a disrupter and market leader, which meant being one of the first in the game, and the 5G horse had long ago (two years, to be exact) bolted.

If Justice Middleton accepts his evidence, lets the merger through and the Feds change their mind, then Australian consumers will be left without a potential new mobile entrant and hence less competition. Then again, Teoh thinks the ACCC has missed the point entirely if it were expected he would be a new entrant.

The Huawei decision has NBN relevance because come mid-year when the rollout is complete, the decision then is when and how to complete the fibre conversion by actually fully rolling out fibre to the premises, as was originally planned and is needed.

5G is a clear competitor to fibre, which is why the decision has some relevance and clearly the more competing suppliers in the game, the better.

The coming British decision is a key one for Prime Minister Johnson in the wake of Brexit, and under heavy pressure from the US to reject the Chinese company.

The argument put by the British mobile carriers is that Huawei would be providing the transmission equipment, away from the core network.

It is also a decision that clearly has a role in the British broadband future, but suffice it to say, whichever way Johnson moves will determine just how hard Huawei will press its case in Australia.

If he says no, then Huawei will revert to Plan B.

Confidence collapses

The folk at Edelman are considering reworking their Australian Trust barometer in the wake of the bushfires, which in some eyes will have a long-term impact on the national psyche.

Certainly, it may have some impact on views around climate change, where as stated here previously, business is already a light-year ahead of the politicians and working on the assumption costs will rise and plans need to be made.

The Australian index won’t be released until late next month.

The read from the global barometer released this week is not great for the federal government when you consider just 32 per cent think they will be better off in five years time.

This was down 2 per cent on year-ago levels. In all, 15 of the 28 markets surveyed were pessimistic, with Japan the lowest at 15 per cent, the US at 43 per cent (down 7 per cent) and Kenya highest at 90 per cent, followed by Indonesia at 80 per cent and India not far behind.

The rankings then seem to be based on developed versus developing country lines, with China ranking highly at 69 per cent.

Income inequality was a major concern and on the issue of trust, scientists came in best at 80 per cent, chief executives at 51 per cent, journalists at 50 per cent, government at 47 per cent and the super wealthy down at 36 per cent.

Gumtree takeover

The eBay subsidiary Gumtree has made a formal application to the competition watchdog to clear its proposed acquisition of Cox Australia Media Solutions, marking only the second such application since the law was changed a little more than two years ago.

The Cox deal, announced late last year, aims to boost Gumtree’s share of the online car classified market. The estimated $80m deal followed eBay’s earlier acquisition of Auto Trader in Britain.

Cox operates online platforms CarsGuide.com.au and Autotrader.com.au.

Formal merger clearance has the advantage of definite time lines and the ability to appeal decisions to the Competition Tribunal once the Australian Competition & Consumer Commission has made a decision.

It can be costly in the initial stages, which makes some clients wary.

But it also allows deals to be cleared on public benefit grounds.

The laws were clarified in 2017 and AP Eagers is the only company to go down the formal clearance route since then. Its acquisition of AHG was cleared after some divestments.

Most companies follow the informal merger route and last year, of the 331 deals considered by the ACCC, 305, or 92 per cent, were cleared without any investigation.

Another perceived disadvantage with the formal clearance route is that companies need to make more formal statements, which are made public.

In this case Gumtree has claimed confidentiality over a lot of material, but it did note “it has experienced a steady decline in inventory and audience reach”.

This seems to have been due to the entry of Facebook into the market and the growing strength of Carsales.com.au.

Carsales handles 72.7 per cent of the auto market and its online advertisements attract 69.5 per cent of all page impressions, with Gumtree a distant second at 18.7 per cent.

This was made worse when Carsales offered free listings for vehicles under $5000.

Gumtree noted, however, that “many dealers are not satisfied with Carsales”.

It said Facebook, which only started car advertisements in 2018, now exceeds Gumtree listings and comes from an enormous base with 17 million users in Australia.

The ACCC said it would make its decision on Gumtree’s application by April 28. Gilbert & Tobin partner Elizabeth Avery is handling the application for Gumtree.