The country’s three mobile network operators, Telstra, Optus and Vodafone, currently have over 87 percent share. Similarly, the fixed broadband market is concentrated, with Telstra, TPG and Optus having 85 percent share. The watchdog said the proposed merger will reduce competition and contestability in this sector, as noted in its preliminary concerns on the deal.
Fourth mobile network operator
The ACCC also expects the proposed merger between TPG and Vodafone to reduce competition in the supply of mobile services as the combination would preclude TPG entering as the fourth mobile network operator in Australia. TPG started deploying a mobile network using Huawei equipment in 2017 but in January 2019 ceased this rollout as a result of the Federal Government’s 5G security guidance.
According to the Commission, TPG has mobile spectrum, an extensive fibre transmission network, a large customer base and well-established telecommunications brands. Falling margins in fixed home broadband due to the NBN rollout and expected growing take-up of mobile broadband services after the rollout of 5G would also support the new mobile operator, the Commission said. "After thorough examination, we have concluded that, if this proposed merger does not proceed, there is a real chance TPG will roll out a mobile network," said ACCC Chair Rod Sims.
TPG currently provides retail fixed broadband services to consumers, small business, government, and enterprises on legacy networks, the National Broadband Network and its own fibre-to-the-basement network. TPG also offers retail mobile services as MVNO and wholesale services, such as transmission and NBN aggregation services, to other telecommunications service providers. TPG, via its TPG, iiNet and Internode brands, has 1.9 million fixed broadband subscribers and 430,000 mobile subscribers.
Vodafone owns and operates its own 3G and 4G mobile network, which reaches nearly 97 percent of the Australian population. VHA, which is owned jointly by Vodafone Group and CK Hutchison, has around 6 million mobile subscribers in Australia. With the merger to create an integrated operator with TPG, the company had hoped to become a stronger challenger to the bigger players Optus and Telstra.
Court appeal
The news of the ACCC's decision sent TPG's share price down 13.5 percent. The company said in a statement that it will join with VHA to file an appeal against the regulatory decision in Federal Court and seek a ruling that shows the envisaged merger would not harm competition. The companies also agreed to extend the deadline for completing the merger to 31 August 2020.
Back in December 2018, TPG and Vodafone acquired 60 MHz of spectrum in metropolitan areas and up to 40 MHz of spectrum in regional areas in the 3.6 GHz band auction pursuant to a joint venture to hold and licence spectrum between the parties. The joint venture is ongoing and will not terminate if the proposed merger does not proceed.
