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. However, last week the ACCC indicated that they will look into the fairness of the merger.
Znet.com reported that 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.
However, according to the ABC, Red flags have been raised about TPG’s plan to merge with Vodafone Hutchison Australia, leaving open the possibility that the competition watchdog ACCC may block the deal.
Customers could end up “paying higher prices” for “less innovative” mobile and fixed broadband plans if the companies are allowed to merge, the Australian Competition and Consumer Commission (ACCC) said in a statement.
“TPG is currently on track to become the fourth mobile network operator in Australia, and as such it’s likely to be an aggressive competitor,” ACCC chairman Rod Sims said.
“If TPG remains separate from Vodafone, it appears likely to need to continue to adopt an aggressive pricing strategy, offering cheap mobile plans with large data allowances.”
The ABC reported that the implications of the merger are that if the nation’s third- and fourth- largest telecommunications were to join forces, it would leave Telstra and Optus as the only other major providers. Both parties to the merger have complementary strengths.
While TPG is seen as a fierce price competitor in the fixed broadband market, Vodafone owns and operates its own mobile network.
The regulator is considering the long-term impact of the TPG-Vodafone deal — particularly given that it expects consumers to increasingly opt for mobile broadband services after the rollout of the 5G network, instead of fixed home broadband.
The competition chief said his organisation is “continuing to consider whether operators will need to offer both mobile and fixed broadband services in the longer term to remain competitive, meaning that TPG and Vodafone will necessarily be closer competitors in the future.”
The ACCC is accepting submissions about the merger from interested parties until January 18. The ACCC has delayed its final decision on the deal until March 28. So watch this space.
