Telco deal under scrutiny

VODAFONE Australia and TPG Telecom have moved to reassure consumers their $15 billion merger won’t kill off cut price telephone and internet deals.

But the wannabe newlyweds will have to win the blessing of the competition watchdog, which will examine issues created by the union.

TPG and Vodafone yesterday unveiled plans to join forces after confirming last week that they were in talks.

Shares in TPG, which had spiked following the revelation last week, surged again on the announcement yesterday, closing 18.2 per cent, or $1.43, higher at $9.31.

Vodafone chief Inaki Berroeta insisted it was a “match made in heaven” for consumers. The combined group would take the TPG Telecom name and be listed on the Australian Securities Exchange.

It would have a market value of almost $11 billion and an enterprise value, which includes debt, of about $15 billion

Based on their performances during the past year, combined revenue would be about $6 billion.

TPG shareholders will own 49.9 per cent of the group, with Vodafone Australia’s investors owning 50.1 per cent.

Vodafone Australia, jointly owned by Britain’s Vodafone Group and Hutchison Telecommunications Australia, is not currently listed.

Hutchison is listed, but has few investors, as the company is owned mostly by Hong Kong-based Hutchison Whampoa.

Mr Berroeta will be chief executive of the merged group, while TPG executive chair David Teoh will chair the company.

The two telcos yesterday promised customers their brands would not be disappearing any time soon.

TPG and Vodafone also revealed they had signed a jointventure agreement for the coming auction of the 5G spectrum by the federal government later this year — a contest that is expected to be hotly contested.

Industry insiders said the combined group would struggle to discount its services to the extent the separate companies had.

They noted profit margins were under pressure, fuelled by strong competition in the mobile market and the rollout of the national broadband network, and the combined group would have a relatively hefty debt pile, at about $4 billion.

TPG, which has been building its own mobile network, had previously flagged a push to offer mobile plans at $9.99 a month. Pressed yesterday as to whether that was still likely, Mr Teoh said: “At the moment that is not our intention.”

But he added: “We are still rolling out our small cell network and … we can leverage under the Vodafone macro network, and we may come up with a good plan to bundle”.

The Australian Competition and Consumer Commission said it would examine the merger proposal over the next 12 weeks.

“(Our) review will look at competitive impacts in mobile services, where TPG now has a growing presence, and also fixed-line, where Vodafone is a discounter,” the ACCC said in a statement.