Thursday, 01 October, 2020

Vodafone-TPG merger given the green light by Australian Federal Court

ACCC bemoans TPG-Vodafone merger decision as 'lost opportunity for stronger competition' Vodafone and TPG can now merge after beating the ACCC in Federal Court
Cecil Davis | 15 February, 2020, 06:22

The Federal Communications Minister Paul Fletcher is confident the proposed merger of telcos TPG and Vodafone will create a stronger third player in the market.

TPG and Vodafone both disputed this, and in fact claimed they were too weak to compete with Telstra and Optus unless they were allowed to merge.

TPG had already spent $1.26b on the spectrum needed to build a mobile network and has an extensive transmission network, according to the ACCC.

Vodafone Hutchison CEO Iñaki Berroeta stated that this was "a great outcome for the Australian economy", as it would allow for greater investment in the next generation networks, including 5G.

Justice Middleton declared today there was no real chance that a fourth mobile network built by TPG would succeed commercially, ZDNet reported. "There is clear evidence that consumers pay more when markets are concentrated".

Then in May 2019 the ACCC blocked the merger of the two companies arguing that customers could end up "paying higher prices" for "less innovative" mobile and fixed broadband plans if the companies were allowed to merge.

"The proposed merger would not have the effect, nor be likely to have the effect, of substantially lessening competition in the supply of retail mobile services in Australia", Federal Court judge John Middleton said on Thursday.

Shares of Hutchison surged as much as a quarter, while TPG shares gained 11%.

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The ACCC is successful in more than 80 per cent of the consumer and competition law cases it brings.

A few months later in May of previous year, the ACCC announced they would oppose the $15 billion merger on the grounds that it would cause further consolidation in Australia's already "very concentrated mobile phone market".

"To leave Vodafone and TPG in its current state would not promote competition in the market", he said in his judgment today.

The company had sought to get out of the MVNO game by building its own 4G network, but said it abandoned those plans after the federal government banned the use of Huawei technology.

Consumers could end up as the big winners in the merger, experts say, as phone and internet prices could be set to drop.

"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".

ACCC chairman, Rod Sims, said in a statement released Thursday, that the regulator is carefully considering the ruling, suggesting it could appeal the decision.

For the merger to be fully finalised, a number of conditions still need to be met, including: the approvals from TPG shareholders, the Federal Court and a number of other regulatory bodies.