BREAKFAST DEALS: Telstra interference

Telstra faces more opposition to its move on ISP Adam Internet, while US giant Delta enters the airline wars via Virgin Atlantic.

Telstra Corporation doesn’t appear to have much M&A room to move domestically thanks to the consumer watchdog. As Macquarie Telecom objects to the telco’s Adam Internet deal, Telstra’s media boss is talking about Asian expansion. Meanwhile, a big potential shift in the ownership of Virgin Atlantic could have implications for Virgin Australia. Elsewhere, Sundance Resources is so very close to a Hanlong deal, Fairfax Media chairman Roger Corbett isn’t letting up over Gina Rinehart and there are a couple of equity raisings on the go.

Telstra Corporation, Adam Internet

Telstra Corporation has received yet another objection to its proposed acquisition of South Australian ISP Adam Internet.

The Australian has obtained a copy of a submission to the Australian Competition and Consumer Commission by Macquarie Telecom, indicating that the company is concerned the state of this country’s telecommunication’s market is "already fragile”.

"Macquarie further believes that the proposed acquisition would set a dangerous precedent by giving Telstra a free hand to pursue further acquisitions.”

This puts Macquarie Telecom in the same corner as Optus and iiNet, which have already voiced their objection to the acquisition. The deal is rumoured to be worth $60 million.

Telstra is becoming increasingly restricted by the consumer watchdog, with previous hints of a run at Consolidated Media Holdings and a rumoured interest in Nine Entertainment swiftly ruled out on regulatory grounds.

Logically, Telstra should be at least looking at expansion internationally where the ACCC is not an issue, particularly given that chief executive David Thodey said Asia was one of three potential avenues for expansion – the other two being media and cloud computing.

On cue, Telstra media boss Rick Ellis spoke to the Weekend Financial Review about potential acquisitions in Asia.

"I did signal a while ago that partnership is our preferred approach, but where we see opportunities for joint ventures or to acquire, in adjacencies, for want of a better word, that might help the growth story of the overall [media] portfolio, we wouldn’t rule those out,” Ellis told the newspaper.

Delta Air Lines, Virgin Atlantic, Virgin Australia, Tourism Australia

The embattled Australian aviation and tourism industries begin this week with a stark reminder that change isn’t just coming from within.

The UK’s Sunday Times understands that America’s largest carrier, Delta Air Lines, has offered to purchase a 49 per cent stake in Virgin Atlantic, the sister company of our very own Virgin Australia. The size of the offer wasn’t revealed, but analysts are already starting to think about whether Delta would logically move to take a stake in Virgin Australia as well.

If Delta wins Singapore Airlines over, which is no sure thing, the America airline’s European partner Air France-KLM would then be able to buy part of Sir Richard Branson’s 51 per cent stake in Virgin Atlantic.

Branson has been contemplating his future in the Virgin Airlines business for some time now. Deutsche Bank was appointed two years ago to review offers.

According to the report, Singapore played a pretty straight bat to the revelation: "We review our investments regularly, but at this point, no decision has been made about a divestment of our shareholding in Virgin Atlantic.”

At first glance, it would appears strange for Singapore to shift away from Virgin Atlantic, given the recently announced decision to take a 10 per cent stake in Virgin Australia.

But Branson’s Atlantic arm faces stronger competition from British Airways, which recently picked up BMI British Midland, along with the same pressures that we’re all too familiar with in the aviation industry.

The industry growth is coming from Asia and Virgin Australia is far better positioned to capitalise.

Admittedly, this line of speculation requires a number of pieces to fall into place and any number of them, including the very first, might not.

But it serves as a useful reminder that the shape of Australia’s airline industry is shaped more than just the jostling between Qantas Airways and Virgin Australia over the former’s proposed alliance with Middle Eastern carrier Emirates and the feud between current Qantas boss Alan Joyce and predecessor Geoff Dixon.

Speaking of which, Virgin Australia has put its hand up to fill some of the funding gap at Tourism Australia left by Qantas.

Qantas has written to its various tourism industry stakeholders saying it would redirect those dollars to other tourism bodies and ventures. We could be in the rather unexpected situation where the decision by Joyce ends up increasing the total amount of money spent by the two airlines on the broader industry.

Sundance Resources, China Sichuan Hanlong Mining

Sundance Resources chairman George Jones had a few jokes at his own expense on Friday as the company inched agonisingly close to finally sealing the deal with China Sichuan Hanlong Mining.

The Africa-focused iron ore company signed an agreement with the government of Cameroon, which greatly helps pave the way for the development of its $4.7 billion Mbalam project. It’s a crucial condition of the $1.4 billion offer from Hanlong.

Jones said this has been one of the most challenging deals he’s faced over a 40-year career as a banker and director.

"Some of you may recall that about a year ago I was asked when I expected the Hanlong transaction to be complete,” said Jones at the company’s annual general meeting late last week.

"I responded by saying that I expected to enjoy Christmas. Fortunately, I didn’t nominate which Christmas.”

Sundance shares have consistently traded at a discount to the 45 cents a share offer price from Hanlong amid widespread scepticism that this deal would ever get done.

The stock has been creeping up ever so slowly since early September. It’s still trading at a discount, closing Friday at 39 cents a share. But the optimists for this deal are finally getting something to really smile about.

Fairfax Media, News Corporation

Fairfax Media chairman Roger Corbett was unequivocal in his appearance on ABC TV’s Lateline on Friday night that mining billionaire Gina Rinehart will need a majority holding of his company to control it.

Things have gone relatively quiet at Fairfax concerning the Rinehart balance, with focus shifting back to the billionaire’s funding requirements to get Roy Hill up and running. Rinehart’s media ambitions have been put on the backburner, at least in the press.

Rinehart currently owns just under 15 per cent of Fairfax and Corbett said she’d have to lift that considerably to have the kind of control she might like.

"If Mrs Rinehart owned over 51 per cent, she’d have that entitlement, as Kerry Packer did at that stage,” said Corbett, referring to the late billionaire and once proud owner of the Nine Network.

"But if she holds less than 51 per cent, then that right is the right of the board collectively,” he told Lateline.

Technically, she mightn’t need 51 per cent. Rinehart ally and latest addition to the Fairfax board, Jack Cowin, was in the market last week picking up stock in the media company.

This is hardly unusual, as board members are expected to have some skin in the game. Cowin forked out $926,000 for an additional two million shares last week, bringing his total to three million.

Presumably, if Rinehart threw caution to the wind and started buying Fairfax stock again, unlikely at least for certain legal reasons, Cowin’s stock would ultimately fall in her favour.

Admittedly, it’s a small stake. But you just have to ask Seven Group billionaire Kerry Stokes, the author of Australia’s modern media playbook, to know that every little bit counts.

Meanwhile, rival media house News Corp, owner of the Australian arm News Limited and this website, has reportedly settled on Wall Street Journal managing editor Robert Thomson as the chief executive of its planned publishing spin-off.

Wrapping up

Aquila Resources is on the hunt for a co-investor for its $1.2 billion Eagle Downs coking coal project, of which it is responsible for $640 million. The mid-tier miner is keen to avoid an equity raising.

Speaking of which, cost pressures and a start-up delay at the Karara iron ore miner in Western Australia has forced Gindalbie Metals into an unexpected $62 million equity raising.

Meanwhile, Woodside Petroleum is reportedly looking at a "number of opportunities” in the US shale gas market. According to The Australian, chief executive Peter Coleman has put the booming sector on the table as something the oil and gas giant is interested in.

While we’re in resources, Fairfax’s Michael West has delivered the details on the receivership fees being racked up over Burrup Fertilisers, the fallen company of Indian tycoon Pankaj Oswal.

Whatever you think of Oswal, the opportunism of those picking apart the leftovers is just awful.

Elsewhere, keep an eye on listed satellite company NewSat, which could launch its $200 million equity raising as soon as today.

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