Telcos put on hold
Watchdog’s hang-up on merger sparks share plunge
THE competition watchdog has delivered a jolt to the telecommunications industry, flagging concerns about the $15 billion merger of TPG Telecom and Vodafone Hutchison Australia.
More than $2.8 billion was stripped from the value of the nation’s listed telcos yesterday after the Australian Competition and Consumer Commission said the deal was likely to erode competition.
ACCC chairman Rod Sims warned the merger could reduce the pressure that had prompted all telcos to compete fiercely on price.
“Our preliminary view is that TPG is currently on track to become the fourth mobile network operator in Australia, and as such it’s likely to be an aggressive competitor,” Mr Sims said.
“We therefore have preliminary concerns that removing TPG as a new independent competitor with its own net- work, in what is a concentrated market for mobile services, would be likely to result in a substantial lessening of competition.
“If TPG remains separate from Vodafone, it appears likely to need to continue to adopt an aggressive pricing strategy, offering cheap mobile plans with large data allowances.”
Shares in TPG tumbled on the revelation, closing 16.7 per cent lower at $1.29 — with $1.2 billion wiped from the group’s market value.
The rout was deeper still at Hutchison Telecommunications Australia, which jointly owns Vodafone with the brand’s namesake British company.
Its shares plunged 21.4 per cent, or 3c, to 11c. That slump cut $407 million from the value of Hutchison.
Shares in heavyweight rival Telstra were also caught in the rip, falling 3.3 per cent in a selloff that stripped $1.2 billion from the group’s market value.
Investors also retreated from Vocus Communications, sending its shares 2.2 per cent lower and cutting $44 million from its value.
Mr Sims said the watchdog also needed to carefully consider the likely impact of removing Vodafone as a competitor in the fixed broadband market.
The regulator is now seeking more submissions, by January 18, from interested parties. Its final decision on the merger is scheduled to be announced on March.