Australian Competition and Consumer Commission (ACCC) has blocked a proposed A$15 billion or $11 billion merger between TPG Telecom and a Vodafone Group unit citing that the deal would cut competition.
The merger was to combine Australia’s third and fourth-largest telecom operators to create a big mobile services provider with additional services boasting TPG’s fiber network and Vodafone’s mobile operations.
For comparison, India has recently approved the merger between Vodafone and Idea Cellular, the second and third largest telecom operators, creating the largest telecom operator in India. There was no protest from regulators and competition authorities.
Australia has three network operators — Telstra, Optus and Vodafone – with 87 percent share. In addition, Australia has three fixed broadband operators — Telstra, TPG and Optus – with 85 percent share.
ACCC in its statement said that TPG already has mobile spectrum, an extensive fibre transmission network which is essential for a mobile network, a large customer base and well-established telecommunications brands.
“TPG is also facing reducing margins in fixed home broadband due to the NBN rollout. There is the growing take-up of mobile broadband services in place of fixed home broadband services which is expected to increase especially after the rollout of 5G technology,” ACCC Chairman Rod Sims said in a statement.
TPG Telecom stopped building its mobile network in January this year because it relied on Huawei Technologies equipment, after the China-based telecom network maker was banned by Australia’s government on security grounds last year.
TPG vs Vodafone
TPG has 1.9 million fixed broadband subscribers
TPG owns and operates voice, data and internet network infrastructure
TPG has 430,000 mobile subscribers
TPG buys 700 MHz spectrum for $1.26 billion
TPG aims to invest $600 million in mobile network
Vodafone is the third largest telecom provider
Vodafone has 3G and 4G mobile network, reaching 97% of the population
Vodafone has 6 million mobile customers
Vodafone supplies wholesale mobile services to MVNOs, including TPG, Vodafone started supply of fixed broadband services through its NBN offering
TPG and Vodafone form JV and buy 3.6 GHz band auction for 5G
The regulator believes the company may revisit the plan to build the network in line with the earlier to plan to invest $600 million and that rivalry in the industry depends on it.
“TPG is the best prospect Australia has for a new mobile network operator to enter the market, and this is likely the last chance we have for stronger competition in the supply of mobile services,” ACCC Chairman Rod Sims said.
“TPG has the capability and commercial incentive to resolve the technical and commercial challenges it is facing.”
TPG Telecom and Vodafone said they would contest the decision in court. But the rejection heaps pressure on the growth plans of both companies, weighing on TPG in particular to resume investment in a mobile network it abandoned in January, Reuters reported.
The deal would stop both from competing in each other’s markets, the ACCC had said in December, concluding on Wednesday it would reduce rivalry in the sector as a whole.
Vodafone Hutchison Australia said it remains committed to the deal. The companies agreed to extend the deadline for implementing the merger until August 31, 2020.
“It is difficult for us to understand this decision,” Vodafone Hutchison Australia CEO Inaki Berroeta said on a conference call with journalists.
Baburajan K
