Court approves $15B TPG-Vodafone merger

The Federal Court has voted in favour of the proposed $15 billion merger between TPG Telecom and Vodafone Hutchison Australia (VHA), overruling opposition from the competition watchdog.

Justice John Middleton rejected a defence from the Australian Competition and Consumer Commission (ACCC) that the merger would harm local competition.

Both the third and fourth largest telcos entered a trading halt on 13 February ahead of the decision in Melbourne.

“TPG is very pleased with the Federal Court decision and looks forward to combining with VHA to create Australia’s newest fully integrated telecommunications operator," TPG executive chairman David Teoh said. "We will work to finalise the other conditions to the merger as soon as possible.”

According to VHA CEO Iñaki Berroeta, the merger should be completed in mid-2020, subject to the remaining approvals and any appeal by the ACCC.

He said that the court process and the Federal Government's Huawei ban had both unfortunately given “free kicks” to competitors for some time.

Now that uncertainty had been removed, the telco will now continue its plan to roll out 5G at 650 sites across Sydney, Melbourne, Brisbane, Adelaide, Perth, Canberra and the Gold Coast.

“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 added.

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

The telcos took the case to court last May following the ACCC's opposition of the merger on the grounds that it would hurt competition in the mobile network market.

The ACCC argued a merger would prevent TPG from resurrecting its plan to roll out Australia’s fourth mobile network, thereby becoming an “aggressive competitor” in the sector.

TPG, a fixed-line provider that has so far only operated as a reseller in the mobile space, announced its long-anticipated move to launch a mobile network in 2017, using its significant spectrum holdings.

However, the telco called time on those plans last January 2019, citing the government’s ban on using Huawei’s 5G equipment.

TPG has spent more than $100 million on its mobile network, but claimed these were based on small cell architecture and that the principal equipment vendor was Huawei.

The ACCC also argued that VHA, Optus and TPG independently would likely place competitive pressure on Telstra’s prices in the “premium segment” of the retail mobile market.

A merged telco on the other hand would have “less incentive” than a new entrant like TPG to gain market share through low prices.

Both TPG and Hutchison Telecommunications, which owns half of VHA, are listed on the Australian Securities Exchange and saw their share prices climb yesterday.

Macquarie Telecom CEO David Tudehope has since issued a statement claiming the decision will "worsen the lack of competition" in Australia's market.

"Now that the decision has been made to allow the merger to go ahead, the government and ACCC will need to reconsider how to improve retail and wholesale competition in mobiles," he said. 

"The telco industry gets twice the number of complaints to the Telecommunications Industry Ombudsman (TIO) as the banking industry’s Australian Financial Complaints Authority (AFCA), its new Ombudsman, even after the Royal Commission. As a result, the telco industry risks losing its social licence.”