A market analyst says Vodafone's purchase of TelstraClear will put the company on "more of an equal footing" with Telecom.
Telstra announced today it had sold TelstraClear to Vodafone for $840 million.
Vodafone will get TelstraClear's voice and data based services, network infrastructure and New Zealand customer base of around 200,000.
Chris Timms, a market analyst from Craigs Investment Partners, told onenews.co.nz the purchase will strengthen what Vodafone can offer its customers.
"This rounds out their whole business in New Zealand, and puts them on more of an equal footing with Telecom," said the analyst.
While Vodafone has a lot of data services, TelstraClear has the infrastructure.
Similarly, Telstra's CEO David Thodey said the transaction has a "strong strategic rationale" and is good for the company's shareholders.
"The deal is a natural one, bringing together TelstraClear's fixed telecommunications and data products and corporate client-base with Vodafone New Zealand's mobile offering and retail customer-base," he said.
Timms also said it was the end of TelstraClear as we know it.
"They've been talking about it for a while, but no one anticipated it would be this quick," he said.
Timms said the buy up will have little impact on the New Zealand market, but Telstra's shares should react positively.
"I imagine Telstra's going to have a fairly good bounce - it's up 1.4% already here."
As part of the transaction, Telstra has entered into an agreement with Vodafone to ensure service continuity in New Zealand for its trans-Tasman customers.
What happens now?
The sale will go through once it gets the green light from the Commerce Commission, Overseas Investment Office and Ministry of Business, Innovation and Employment.
That process is expected to take a few months.
Timms said some interesting issues could come out of this process, because the telecommunications market has been a "hot bed" of claim and counterclaim about competition.
"It's possible we need to consider the implications of the sale...but the Commerce Commission may already say there's enough competition," he said.
In February, TelstraClear reported a return to profit on a pretax earnings basis, reflecting its cost-cutting programme.
The Auckland-based company had earnings before interest and tax of $1 million in the six months ended December 31, turning from an EBIT loss of $8 million a year earlier.
Operating expenses fell 7.2% to $270 million, helping lift
earnings by 11% to $69 million.