Telcos shunned after concerns

SYDNEY: Investors have shunned Vodafone Australia and TPG Telecom after the competition watchdog raised concerns that their merger into a $15 billion telco giant could mean higher mobile prices for consumers.

TPG shares were down 15.25% after 35 minutes of trade yesterday, after the Australian Competition and Consumer Commission, which has the power to block the merger, said the plan could reduce competition for mobile customers.

Shares in Hutchison Telecommunications — which owns a 50% stake in Vodafone Australia — were even more heavily hit, falling 25%.

Outlining its concerns in a statement of issues, the ACCC said TPG represented a new independent competitor in a concentrated market.

It was concerned that the merger announced in August would remove the incentive for TPG — which is building its own $600 million mobile network after paying $1.26 billion in a 2017 spectrum auction — to price aggressively in an effort to rival incumbents Telstra, Optus and Vodafone.

‘‘Our preliminary view is the merged TPGVodafone would not have the incentive to operate in the same way, and competition in the market would be reduced as a result,’’ ACCC chairman Rod Sims said.

‘‘A mobile market with three major players, rather than four, is likely to lead to higher prices and less innovative plans for mobile customers.’’

The ACCC will also look at the possible impact of removing Vodafone — which has started supplying services on the NBN — as a competitor in fixed broadband.

‘‘Although Vodafone is currently a relatively minor player in fixed broadband, we consider it may become an increasingly effective competitor because of its high level of brand recognition and existing retail mobile customer base,’’ Mr Sims said.

The ACCC is asking for responses to its preliminary concerns by January 18, and is scheduled to make its final decision by March 28.

TPG shares were down $1.18 at $6.56 in early trading, while Hutchison Telecommunications was down 3.5c to 10.5c. — AAP