Vodafone-TPG US$10bn merger receives approval from Australian court

AUSTRALIA – An Australian court has approved a A$15 billion (US$10.1 billion) merger between a unit of Britain’s Vodafone Group and internet provider TPG Telecom.

The ruling is a reprieve for the two companies whose plan to merger had been rejected by the Australian Competition and Consumer Commission’s (ACCC).

In giving its verdict, the ACC had argued that a tie-up between Vodafone’s joint venture with local telco Hutchison Telecommunications (Australia) Ltd and TPG would harm competition.    

The ruling revives a plan to challenge the dominance of Telstra Corp Ltd and Singapore Telecommunications’s Optus in the Australian market by giving TPG and Vodafone, access to each other’s sizeable nationwide networks.

According to Reuters, TPG had been looking for a way into the highly anticipated 5G mobile market after halting construction of its own network due to an Australian ban on parts supplied by China’s Huawei Industries.

“This merger…gives a lot more certainty that there will be a strong 5G player in the market. We have confirmation we’ll have three 5G players,” Vodafone Hutchison Australia CEO Iñaki Berroeta said on a call with analysts.

TPG founder and Executive Chairman David Teoh said in a statement the company was “very pleased with the Federal Court decision” although it still needed shareholder and other regulatory approvals.

The ruling was “consistent with our expectations and we’d already factored in a successful merger”, Credit Suisse analysts said in a note.

The ruling serves as another blow to the Australian regulator which has had decisions to block some of the country’s biggest M&A deals of recent years overturned by courts.

“Australian consumers have lost a once-in-a-generation opportunity for stronger competition and cheaper mobile telecommunications services with this merger now allowed to proceed,” ACCC Chairman Rod Sims said in a statement.

The ACCC had argued TPG may yet build a 5G network – without Huawei parts – if it had no other option. TPG had ruled out revisiting the network on grounds that other parts suppliers were too expensive.

Murray King, chief financial officer of SingTel-owned Optus, said on earnings call the company would “see how the merged entity looks to drive their operations and how they go to market”.

TPG Telecom Limited is an Australian telecommunications and IT company that specialises in consumer and business internet services as well as mobile telephone services.

Vodafone Hutchison Australia is Australia’s third-largest mobile carrier with approximately 5.8 million subscribers with 19 per cent market share.

This makes it Australia’s third largest mobile telecommunications provider behind Telstra and Optus and the anticipated merger with TPG telecom is expected to give Australia a new and more competitive entity.

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