Customers lose out in Voda, 3 deal

Vodafone and Hutchison executives have confirmed that they would make staff cuts to reach the $2 billion in savings they hope to achieve from the merger, but analysts doubt whether it will lead to a better outcome for customers.

Vodafone and Hutchison executives have confirmed that they would make staff cuts to reach the $2 billion in savings they hope to achieve from the merger, but analysts doubt whether it will lead to a better outcome for customers.

The proposed joint venture, which had been under discussion since before Christmas, according to Vodafone and Hutchison executives, will mean a retail distribution network of some 400 stores — some of which are likely to be shut if the merger is approved.

In a letter to employees, the company's proposed chief executive Nigel Dews told staff that "unfortunately there will be some duplication".

Executives at today's media briefing would not say whether it expected to close any Crazy John stores, which had bolstered Vodafone Australia's customer base since it completed the acquisition of its stake in the company.

Dews said he believed the joint venture would drive more "competitive offerings for all consumers" and improve network coverage.

Mobile analysts have said that while the merger would more clearly define the markets in which Telstra, Optus and VHA dominated, it would not necessarily result in a more competitive market for consumers.

"This merger will clearly redefine Australia's mobile market from a positioning perspective, with Telstra occupying the high-end, Optus in the middle, and VHA at the bottom serving consumers," Telsyte research director Warren Chaisatien said today. "However, it is hard to see how this will lead to more competitive offerings for Australian mobile users."

VHA will now have 25 per cent of the Australian mobile market, according to Telsyte; however, it still has just 15 per cent of the enterprise market.

The economic climate had little to do with the decision to merge the companies, executives said today. Rather it was to build a large enough company to compete with Telstra and Optus.

Until the merger has been approved by regulators and Hutchison Telecommunication Australia Limited's shareholders, the companies are keeping their respective network roaming deals with upstream providers in place.

Hutchison 3 currently has a roaming deal with Telstra while Vodafone has one in place with Optus. Today's announcement would not result in a change to the status of these arrangements, executives said.

Both mobile operators were committed to expanding existing 3G network coverage over the coming year to reach 96 per cent of the population, with black spots patched up under roaming deals with upstream providers.

Vodafone executives said that Vodafone would make an announcement about its 3G roll-out in the coming fortnight. Before Christmas Vodafone announced that delays by Ericsson, which had been contracted to roll-out the network, would mean its 3G network would not be ready until sometime in 2009.

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