ACCC on TPG-Vodafone: Consumers need the benefits of vigorous competition

As the two telcos head to the Federal Court of Australia to push for their merger to be given the green light.

The Australian Competition and Consumer Commission (ACCC) has held firm on its position to block the proposed merger between TPG and Vodafone Hutchison Australia (VHA), saying effective merger control in general is fundamental to a successful market economy.

Speaking at the 2019 Competition Law Conference in Sydney on Saturday, ACCC Chair Rod Sims expanded on what he has said previously, that TPG has a proven track record of disrupting the telecommunications sector and establishing itself as a successful competitor in fixed broadband services, noting that it has resulted in "large" benefits for customers.

"Removing TPG as an independent player, with its customer base, backhaul infrastructure, and spectrum, would, in our view, have a very negative impact on Australian consumers in this increasingly important market," he said, adding also that four mobile players result in better outcomes.

SEE ALSO: ACCC ponders merger law revamp to stay relevant in the digital era

According to Sims, the scale or financial strength of a competitor does not determine its competitiveness. He said rational pricing should not be confused with consumer interest.

"The prospect of more rational pricing, meaning higher and stable pricing, was warmly anticipated by many analysts when this merger was first announced. Most commentators at that time, therefore, saw the merger as a long-term positive for Telstra and Optus," Sims said.

"Consumers need the benefits of vigorous competition in order to obtain competitive pricing and the innovation that is in their interests.

"Effective merger control in general is fundamental to a successful market economy. I think there are more debates to come as we reflect on the economic harm associated with concentrated markets."

Discussing other mergers the ACCC has blocked, Sims used them as evidence that he is "sceptical when merger parties tell us the world will end if we do not let a merger proceed".

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After the ACCC handed down its decision, the two telcos swiftly announced they would head to Federal Court to seek approval for their merger.

The companies hold firm they have little overlap.

A statement from TPG on Friday said proceedings had been lodged with the Federal Court of Australia, seeking orders that the "proposed merger between VHA and TPG will not have the effect, or likely effect, of substantially lessening competition".

Similarly providing an update on the proposed merger on Friday, a spokesperson for Vodafone said the organisation is still of the opinion that the merger will encourage competition in the Australian market.

"Vodafone Hutchison Australia has today filed a statement of claim with the Federal Court to seek approval for the proposed merger with TPG," they said.

"We believe the merger will create an entity that can compete more aggressively in the mobile market and will increase our ability to invest in networks, new technologies, and competitive plans and products for Australian consumers."

TPG was in the midst of deploying its Australian mobile network when it made the decision in January to abandon its mobile network build in Australia, and cop a AU$230 million accounting hit.

The company said the decision was made due to the Australian government's ban on Huawei 5G equipment. The telco said it had purchased equipment for 1,500 sites, as well as 900 fully or partially completed small cell sites. The company has already racked up AU$100 million in costs, with a further AU$30 million to come.

Chief executive of VHA Inaki Berroeta argued that the proposed AU$15 billion entity would be able to take the fight to its rivals.

The merger agreement between the two parties has been extended to the end of August 2020 to allow for the Federal Court to make a decision, and for the merger to be completed.

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