Vodafone Hutchison to merge with TPG
SYDNEY: There’ll be no quick escape from Australia for Vodafone Group Plc.
Vodafone Hutchison Australia Pty, Vodafone’s unprofitable mobile-phone venture with CK Hutchison Holdings Ltd, said yesterday it would merge with local broadband provider TPG Telecom Ltd in an attempt to better challenge market leader Telstra Corp.
The transaction locks in United Kingdom-based Vodafone and Hong Kong’s CK Hutchison for two years. Some A$4.8 billion (RM14.39 billion) of the net debt amassed by their phone venture is being ring-fenced from the deal and will be guaranteed by the two offshore giants.
The deal spells the end of the standalone union between Vodafone and CK Hutchison that won only 19 per cent of Australia’s mobile-phone market in almost a decade. Instead of quitting Australia, where Vodafone has battled to overcome a reputation for a patchy network, the agreement prolongs its commitment to the country.
“You just have to look at the amount of capital that Vodafone has placed in this infrastructure over the years and that’s something that usually links investors to the asset for a long time,” said Vodafone Hutchison Australia chief executive officer (CEO) Inaki Berroeta.
Vodafone and CK Hutchison were in “for the long run”, said Berroeta, who would be CEO of the merged group.
Vodafone Hutchison will have a 50.1 per cent stake in the new group and shareholders of TPG, which is unrelated to the eponymous private-equity firm, will own the rest.
The new entity would be worth as much as A$10.9 billion, said the companies.
TPG Telecom CEO David Teoh will be chairman.
TPG jumped 15 per cent to A$9.10 at 2.04pm, here, valuing it at A$8.7 billion. Hutchison Telecommunications Australia Ltd leapt 44 per cent.
Telstra rose 2.6 per cent as investors viewed the deal as better for Australia’s former phone monopoly than TPG’s plan to build its own network that might kick off a price war.
According to the terms of the agreement, Teoh had also locked in 80 per cent of his 17 per cent stake in the new group for 24 months after the deal’s completion.