Vodafone Australia and TPG head to court for merger approval

Vodafone Australia and TPG are heading to Federal Court to seek approval for their merger, following the decision of the Australian Competition and Consumer Commission (ACCC) to oppose the deal on Wednesday.

Chief Executive of Vodafone Hutchison Australia (VHA) Inaki Berroeta said the merger involved two companies with little overlap.

"VHA is an established mobile business with less than one per cent of the fixed broadband market, while TPG is the second largest fixed broadband player with no mobile network," said Berroeta.

"The merger provides a unique opportunity for VHA and TPG to combine their complementary assets."

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.

Berroeta argued that the proposed AU$15 billion entity would be able to take the fight to its rivals.

See: ACCC opposes TPG and Vodafone Australia merger

"The merger would create an entity that can compete more aggressively in this highly competitive market than either VHA or TPG could on their own," he said.

"It is disappointing that the ACCC does not see it this way."

Vodafone added that the merger agreement with TPG 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.

Explaining its decision on Wednesday, the ACCC said the merger would reduce competition in the telco sector, and said TPG had a "commercial imperative" to deploy its own mobile network.

"TPG is the best prospect Australia has for a new mobile network operator to enter the market, and this is likely the last chance we have for stronger competition in the supply of mobile services," ACCC chair Rod Sims said.

"Wherever possible, market structures should be settled by the competitive process, not by a merger which results in a market structure that would be subject to little challenge in the future. This is particularly the case in concentrated sectors, such as mobile services in Australia."

Sims noted that TPG has the fibre assets, transmission network, spectrum, and customer base to move into mobile, while Vodafone had moved into fixed broadband.

"TPG is also facing reducing margins in fixed home broadband due to the NBN rollout. Further, there is the growing take-up of mobile broadband services in place of fixed home broadband services which is expected to increase especially after the rollout of 5G technology," Sims added.

"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."

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