The Federal Court has declared a proposed merger between TPG Telecom (ASX: TPM) and Vodafone Hutchison Australia (ASX: HTA) would not substantially lessen competition.

The ACCC opposed the merger last year because it considered that, in the absence of the merger, TPG was likely to continue to roll out its own mobile network and become an innovative and disruptive competitor in Australia’s concentrated mobile telecommunications market.

TPG had already spent $1.26 billion on the spectrum needed to build a mobile network, has an extensive transmission network, as well as a large customer base, and well-established brands in TPG, iiNet and Internode.

The ACCC also believes TPG has the ability and incentive to overcome technical and commercial challenges.

“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 Chair Rod Sims said.

“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. 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.”

The ACCC is successful in more than 80 per cent of the consumer and competition law cases it brings. It opposes mergers in a range of markets every year, with very few such decisions challenged in court.

“We will continue to oppose mergers that we believe will substantially lessen competition, because it’s our job to protect competition and, in doing so, ensure that Australian consumers enjoy the benefits of competition,” Mr Sims said.

“We stand by our decision to oppose this merger. If the ACCC won 100% of the cases we took it would be a sign we weren’t doing our job properly; by only picking ‘safe’ cases and not standing up for what we believe in.”

“The future without a merger is uncertain. But we know that competition is lost when main incumbents acquire innovative new competitors.”

The ACCC is carefully considering the judgment.

Vodafone/TPG merger approval will deliver real benefits for Australia

February 13, 2020

Vodafone Hutchison Australia (VHA) welcomes the Federal Court’s decision to allow the proposed merger with TPG Telecom to proceed.

VHA, along with TPG, will work to complete the merger so that the benefits can flow to Australian consumers.

VHA Chief Executive Officer Iñaki Berroeta said it was a great outcome for the Australian economy as it would allow for greater investment in next generation networks including 5G.

“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.”

Mr Berroeta said the lengthy process to obtain competition approval for the merger and the Huawei ban had both unfortunately given “free kicks” to competitors for some time.

He said the Court’s approval had now removed that uncertainty and Vodafone could accelerate the delivery of 5G technology to its customers (as per the attached initial rollout plan).

He said the spectrum holdings of the merged company would increase Vodafone’s network capacity and scope for further investment.

“For the first time, Australia will have a third, fully-integrated telecommunications company,” he said.

“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.”

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

“We’re looking forward to progressing our plans and will continue to keep our customers and the market informed of our progress,” he said.