Thursday, 13 February 2020 11:31

Vodafone / TPG merger cleared to proceed Featured

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A merger between two of Australia's largest telcos, Vodafone Hutchison Australia and TPG Telecom, has been given the green light after a successful court challenge to an initial ACCC ruling in regard to 'lessened competition.'

In a decision handed down in the Federal Court on Thursday morning, Justice John Middleton announced that the merger of TPG and Vodafone would not "substantially lessen competition" as the Australian Competition and Consumer Commission had argued.

At an initial hearing in May last year, the ACCC opposed the merger, arguing that the legal test of not "substantially lessening competition" could not be achieved, as this was in an industry dominated by Telstra, Optus and Vodafone.

According to Justice Middleton, "The courts has come to the view that the proposed merger would not have the effect, or be likely to have the effect of substantially reducing competition … the merger can proceed."

"To leave Vodafone and TPG in its current state would not promote competition in the market," he added.

This will be a merger of the third and fourth largest telecommunications operators in Australia.

TPG chief executive David Teoh had previously announced an intention to build out a mobile network to become a fourth operator in Australia, but last year shelved those plans as being unaffordable. Much of the ACCC case rested on an expectation that TPG may resurrect those plans.

The merged entity would become an estimated $15 billion mobile and broadband organisation that would be able to offer significant competition to Telstra and Optus across the full range of their existing product range.

Justice Middleton also praised Teoh's evidence as fulsome and accurate. While accepting that TPG may have had thoughts of resurrecting the mobile network plan, he said this would have been unlikely for at least five years.

Expectedly, VHA chief executive Iñaki Berroeta hailed the verdict as a good outcome for the economy.

“It’s been 18 months since we commenced the approval process for this merger and we’re very keen to move forward and deliver these benefits as soon as possible,” he said.

“We have ambitious 5G rollout plans and the more quickly the merger can proceed, the faster we can deliver better competitive outcomes for Australian consumers and businesses.”

He said the merger should be completed by mid-2020, subject to the remaining regulatory/shareholder approvals, and any appeal by the ACCC.

ACCC chair Rod Sims said it still believed that TPG was able to overcome any technical and commercial challenges to launch its own mobile network.

“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,” he said.

“Mobile telecommunication services are integral to Australia’s social and economic future and Telstra, Optus and Vodafone already control almost 90% of the market. 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. These concerns were reinforced by statements from the industry welcoming the merger and the consequent 'rational' pricing.”

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David Heath

David Heath has had a long and varied career in the IT industry having worked as a Pre-sales Network Engineer (remember Novell NetWare?), General Manager of IT&T for the TV Shopping Network, as a Technical manager in the Biometrics industry, and as a Technical Trainer and Instructional Designer in the industrial control sector. In all aspects, security has been a driving focus. Throughout his career, David has sought to inform and educate people and has done that through his writings and in more formal educational environments.

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