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SYDNEY. Australia’s antitrust regulator has blocked an asset transfer deal between Telstra and TPG, the country’s No. 1 and No. 2 wireless internet companies, citing competition concerns, setting the stage for a legal battle over access to four million customers.

In a deal announced in May, Telstra Group was to buy spectrum – the airwaves that carry wireless internet – and transmission towers from TPG Telecom Ltd, while TPG would continue to sell 4G and 5G coverage using what would become Telstra’s infrastructure. : They did not disclose financial details.

But No. 3 wireless internet provider Optus, which is owned by Singapore Telecommunications, opposes the deal, saying it would create market dominance for Telstra.

The Australian Competition and Consumer Commission (ACCC) ruled against it on Wednesday, saying it would “create a real risk that TPG and Optus will invest less in critical infrastructure”.

Telstra and TPG said they would appeal the ACCC’s decision, which they called disappointing and a lost opportunity for the 17 per cent of Australia’s 25 million people who will be affected by connectivity.

The decision marks the second legal showdown between TPG and the ACCC in just two years. The ACCC blocked TPG’s purchase of CK Hutchison Holdings Ltd’s Vodafone Hutchison Australia, only for the Federal Court to overturn it and allow the deal to go ahead in 2020.

It’s a bright spot for Optus, which faced intense criticism, including from the federal government, after a data breach was reported in October that affected about 10 million customers’ accounts.

“By canceling this deal, the ACCC has helped ensure that our regional communities continue to benefit from competition,” Optus chief executive Kelly Bayer Rosmarin said in a statement.

Shares in Telstra, which already has the most customers in Australia’s main internet and telecoms markets, were flat, while TPG shares were down 3 per cent in mid-session on Wednesday, against a 1.3 per cent rise in the broader market.

“The unsuccessful appeal to the Australian Competition Tribunal could have a longer-term impact on our EBITDA forecasts, excluding the potential incremental investment needed to upgrade regional networks,” UBS analysts wrote in a client note about TPG.

Independent telecoms analyst Paul Budd said the ACCC’s decision showed Australia’s competition regulation was in line with commercial realities, focusing on infrastructure ownership rather than services.

“You can say that the ACCC has failed to start moving in that direction, or you can argue that the industry should have lobbied for a general review of telecoms regulation,” he said in an email.

“The industry and the ACCC need to sit down and develop a new regulatory system that takes reality into account,” he added.

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