Australia's Federal Court approves TPG-Vodafone merger

Thursday 13 February 2020 | 08:32 CET | News
Australia’s Federal Court has declared a proposed merger between TPG Telecom and Vodafone Hutchison Australia (VHA) would not substantially affect competition. Back in May 2019, the ACCC rejected the merger because it considered that, in the absence of the merger, TPG was likely to continue to deploy its own mobile network and become a disruptive competitor in Australia’s concentrated mobile telecommunications market. The companies appealed and have won the suit.

In May 2019, TPG Telecom and VHA started court proceedings to fight the watchdog's rejection of their proposed merger. VHA claimed the merger would create an entity able to “compete more aggressively in the mobile market”. Vodafone also said the merger would boost its ability to invest in networks, new technologies and competitive plans and products for Australian customers. 

In August 2018, VHA and TPG agreed to establish a new integrated operator in Australia worth an estimated AUD 15 billion. Vodafone then said the merged company would be "a more powerful challenger to Telstra and Optus", with an integrated fixed and mobile offering. It would also be better able to invest in next-generation mobile and fixed networks and provide service and product upgrades for Australian customers.

TPG has already spent AUD 1.26 billion on the spectrum needed to build a mobile network, has an extensive transmission network, as well as a large customer base, and already established brands in TPG, iiNet and Internode. However, its plans to build its own mobile network were abandoned after the Australian government banned working with Huawei. 

According to ACCC data, Telstra, Optus and Vodafone control almost 90 percent of Australia’s mobile market. The ACCC’s concern was that with this merger, mobile data prices will be higher than they would be otherwise. These concerns were reinforced by statements from the industry welcoming the merger and the consequent ‘rational’ pricing, the regulator said. The ACCC also says it “stands by our decision to oppose this merger”, and that it “is carefully considering the [Federal Court’s] judgment”.

VHA and its main shareholder CK Hutchison welcomed the Federal Court’s decision to allow the merger with TPG Telecom to proceed. VHA CEO Inaki Berroeta believes the Court’s decision  is “a great outcome for the Australian economy as it would allow for greater investment in next generation networks including 5G”. Berroeta also says the spectrum holdings of the merged company would increase Vodafone’s network capacity and scope for further investment. Berroeta expects the merger to be completed in mid-2020, subject to the remaining regulatory/shareholder approvals, and any appeal by the ACCC.

TPG also applauded the Federal Court’s approval of the TPG-VHA merger via a scheme of arrangement which “will not, and is not likely to, substantially lessen competition”, TPG said. TPG also reports that its directors continue to unanimously recommend that all shareholders vote in favour of the scheme in the absence of a superior proposal. 

Each TPG director intends to vote in favour of the Scheme in relation to the TPG shares in which they have an interest, in the absence of a superior proposal. The implementation of the Scheme remains subject to a number of conditions, including approvals from other regulatory bodies, the Federal Court and TPG Telecom shareholders.

Subject to approvals, TPG expects its merger with VHA to be completed in mid-2020.




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Categories: Mobile & Wireless
Companies: iiNet / Internode / Optus / Telstra / TPG / Vodafone / Vodafone Hutchison Australia
Countries: Australia
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