TPG and Vodafone Hutchison Australia have announced that they will proceed with their merger to form a telecommunications giant that they say will have an enterprise value of approximately AU$15 billion.
The new TPG , which will see current Vodafone chief Inaki Berroeta serve as CEO and current TPG chief David Teoh serve as chair, will produce revenue of AU$6 billion, earnings before interest, tax, depreciation, and amortisation (EBITDA) of AU$1.8 billion, and have an operating free cash flow of AU$900 million.
The company will be owned 50.1 percent by Vodafone Australia shareholders and 49.9 percent by TPG shareholders, with the two companies to form a joint venture ahead of the upcoming 3.6GHz spectrum auction to join forces in bidding for 5G spectrum holdings -- a JV that they said would continue whether the merger proceeds or not.
"The merger will create a more effective challenger to Telstra and Optus, with an integrated fixed and mobile offering and a pro forma enterprise value of approximately AU$15 billion," the companies said in a joint announcement to the Australian Securities Exchange (ASX) on Thursday morning.
"The companies own and operate highly complementary telecommunications network infrastructure, including 27,000km+ metropolitan and inter-capital fibre networks, a leading mobile network with over 5,000 sites, international transit capacity, and a strategic portfolio of spectrum assets. The combination of these assets will maximise the opportunities presented by convergence and best position the combined company to invest in 5G technologies.
"There are no changes currently planned to any of the existing brands of either TPG or VHA."
Following the merger, Vodafone Australia should have a net debt of around AU$1.944 billion plus a spectrum payment of AU$80 million on January 31, while TPG will have a net debt of around AU$1.672 billion plus a spectrum payment of AU$352 million on January 31, with Berroeta calling the merged entity "a more sustainable company".
The merger is expected to complete next year, and is dependent on shareholder and regulatory approvals. The company expects to hold 20 percent of the Australian mobile market share, and 22 percent of the fixed-line broadband market upon merging.
TPG's Singapore operations will be spun off into a separate company, with the telco set to launch Singapore's fourth mobile network by the end of 2018.
The two telcos had last week confirmed that they had entered discussions on a possible merger of the two mobile and fixed-line telecommunications companies, with TPG referring to it as a "merger of equals".
Prior to the merger announcement, TPG had been set to launch its AU$1.9 billion Australian mobile network in the second half of 2018 across Sydney, Melbourne, and Canberra, with the telco in March announcing the installation of sites in Sydney and Melbourne.
TPG had in May announced that it would be launching six-month mobile plans at zero cost for its first customers from Q3 or Q4 this year, with the provider also offering customers access to unlimited data.
TPG currently wholesales Vodafone's 4G network under a AU$1 billion deal that also involved TPG building out a 4,000-kilometre fibre network for Vodafone to launch a fixed-line National Broadband Network (NBN) offering.
Australian telecommunications entrepreneur Bevan Slattery has previously predicted that TPG will become the second-largest carrier in Australia within five years, while analyst firm Telsyte has said TPG could sign up two in five Australians to its mobile network.
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