ACCC bemoans TPG-Vodafone merger decision as 'lost opportunity for stronger competition'

Yolanda Curtis
February 15, 2020

A Federal Court judge said a tie-up between Vodafone's joint venture with local telco Hutchison Telecommunications (Australia) Ltd and TPG would not harm competition, rejecting the Australian Competition and Consumer Commission's (ACCC) reason for blocking the deal a year ago.

TPG had already spent $1.26b on the spectrum needed to build a mobile network and has an extensive transmission network, according to the ACCC.

Justice Middleton said he accepted that the combined Vodafone and TPG would be better able to compete with Telstra and Optus.

Vodafone Hutchison Australia CEO Inaki Berroeta said a merger with TPG would increase the company's network capacity and speed up the planned rollout of a high-speed 5G network.

The move is fiercely opposed by the competition watch dog the ACCC, which was challenging the proposed merger in court. "We have confirmation we'll have three 5G players", Vodafone Hutchison Australia CEO Iñaki Berroeta said on a call with analysts.

ACCC has taken the stance that Australian consumers have lost "a once-in-a-generation" opportunity for "stronger competition and cheaper mobile telecommunications services" as the merger can now go ahead.

When asked by the ACCC's counsel Michael Hodge QC if anyone on the TPG board, which includes his son Shane, asked why there was no business plan to support spending $900 million on spectrum for the proposed network, Mr Teoh said no one asked because they trusted him.

The ACCC had argued the two companies should not be allowed to merge because it would stop any chance of TPG becoming Australia's fourth mobile network operator - a new competitor to Telstra, Optus, and Vodafone.

Rumours of the merger were first confirmed back in August 2018, with both companies announcing their intention to more effectively compete with Telstra and Optus - the two telcos that have dominated the telecommunications market thus far and continue to do so.

The company had sought to get out of the MVNO game by building its own 4G network, but said it abandoned those plans after the federal government banned the use of Huawei technology.

The share price response was an unsurprisingly bullish one: when TPG Telecom (ASX: TPM) left its trading halt - the stock shot up 12.93% - to $8.255 per share.

These concerns, Sims said, were reinforced by the industry welcoming the merger and the consequent "rational" pricing.

At this stage it's unclear what direct impact this merger will have on consumers, but if the ACCC is to be believed, a more concentrated market would lead to higher costs for consumers for both mobile and broadband plans.

Vodafone Hutchison Australia - a venture between Vodafone's Australian mobile-phone division and CK Hutchison Holdings - said the merger should now be completed by the middle of this year, subject to any appeal.

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