The Federal Court has given TPG and Vodafone approval for a proposed merger, despite the ACCC's concerns that it would lessen competition in the mobile and broadband space.
However, Justice John Middleton ruled in favour of the merger, saying that leaving TPG and Vodafone in their current state would not increase competition, and that the merged entity will be a more effective force when it comes to competing with Telstra and Optus.
The ACCC has 28 days to lodge an appeal, which could prolong the process by a minimum of six months. Assuming the ACCC doesn't appeal, the merger is still subject to approval from the Foreign Investment Review Board and a US Regulator. This means it is unlikely to be implemented until the second half of this year. Vodafone is hoping it will be complete by mid-2020, however, subject to any appeal.
ACCC Chairman Rod Sims says the regulator stands by its decision to oppose the merger, but has yet to clarify whether it will appeal the decision.
"Mobile telecommunication services are integral to Australia’s social and economic future and Telstra, Optus and Vodafone already control almost 90 per cent of the market," said Sims. "There is clear evidence that consumers pay more when markets are concentrated."
"The ACCC’s concern was that with this merger, mobile data prices will be higher than they would be otherwise."
The ACCC originally opposed the merger on the grounds that it would disincentivise TPG from building its own mobile network. TPG announced plans to build its own mobile network in 2017, but halted work on it following the Federal Government's ban on the use of Huawei equipment in Australian 5G networks.
At the time, TPG said Huawei was chosen as the primary equipment supplier for its mobile network as it allowed a simple upgrade path to 5G. The TPG network was designed with this is mind, but the upgrade path was made unavailable, and as such, TPG decided to no longer invest in the project.
Both telcos pitched the merger as an opportunity to more effectively compete with Telstra and Optus, leveraging TPG's fixed-line assets and Vodafone's mobile network.
Executives from Vodafone and TPG were pleased by the news.
"For the first time, Australia will have a third, fully-integrated telecommunications company," said Vodafone CEO Iñaki Berroeta. "This will give us the scale to compete head-to-head across the whole telecoms market which will drive more competition, investment and innovation, delivering more choice and value for Australian consumers and businesses."
"TPG
is very pleased with the Federal Court decision and looks forward to combining
with [Vodafone] to create Australia's newest fully integrated
telecommunications operator," said TPG Executive Chairman David Teoh.
"We will work to finalise the other conditions of the merger as soon as
possible."
If the merger goes ahead, the new entity will be valued at approximately $15 billion. The new company will be called TPG, but there are no changes currently planned to either TPG or Vodafone's existing consumer-facing brands.
Alex Choros
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