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BREAKING NEWS: TPG and Vodafone To Merge, Loss To ACCC

In what is set to be a transformation deal, TPG and Vodafone are now able to merge – a move that is set to change the telco landscape in Australia.

Earlier today, the Australian Federal Court approved the merger of the two carriers in a major blow to the ACCC who had earlier blocked the deal, despite most analysts predicting that they would lose the case on appeal.

The merger will see the emergence of a new $15 billion mobile and broadband powerhouse, but what is not known in this stage is who will be the principle executives in the new company?

(AAP Image/Joel Carrett)

Channel News understands that directors of the two companies have been consulting with a major Indian-owned company who consults to several major telco brands around the world.

The decision comes after Justice John Middleton was in favour of the merger in a ruling handed down today.

Following this morning’s Federal Court decision to allow the TPG – Vodafone merger, Boost Mobile founder Peter Adderton said  “The dynamic of the telecommunications industry has changed permanently over the last 48 hours, when looking at both the TPG-Vodafone merger in Australia and the T-Mobile-Sprint merger in the US.

In Australia, the ACCC was fighting to keep a fourth network that never actually existed in reality. It was a promise by TPG that pushed prices down, but as I have said before, their intention was never to actually go through with a network build. David Teoh is the ultimate telco poker player, who played the game and some key industry players masterfully and got done what he needed to. I can also see him wanting to have more control of this combined business and I don’t see Vodafone having any appetite to oppose this either.

The sad part of today’s decision is the opportunity that the ACCC had to put some conditions around the merger that would have helped protect MVNOs, who will now effectively be the fourth virtual network. We would have liked to see more protections in place for MVNOs as part of today’s decision, as keeping the bigger guys honest is really important for Australian consumers and competition more broadly.

Ultimately, the ACCC was right in that having a fourth network is better for consumers. The problem has always been that TPG was never really going to be this fourth network, so it is up to Boost and the MVNOs to keep the bigger guys honest, and we must continue to push the envelope and be that value play for consumers.

As evidenced by what is happening in the US with the T-Mobile/Sprint merger, Australia now has a global brand in Boost Mobile, which has come out as the clear winner in this merger. A Boost MVNO was strong enough to create a fourth competitor in the US.”

Justice John Middleton said in his ruling that it wasn’t the number of competitors in the Australian market, but the quality of competitors, that determined the overall impact to competition.

“Leaving TPG and Vodafone in their current state would not create more competition in the retail mobile market,” Justice Middleton said, adding it was not up to the ACCC to “engineer competition”.

“The court has come to the view that the proposed merger would not have an effect nor is likely to have an effect or substantially lessen competition.”

The ACCC said after the ruling it stood by its decision to oppose the merger, and was “carefully considering” the judgment.

“Australian consumers have lost a once-in-a-generation opportunity for stronger competition and cheaper mobile telecommunications services with this merger now allowed to proceed,” ACCC chair Rod Sims said.

“Mobile telecommunication services are integral to Australia’s social and economic future and Telstra, Optus and Vodafone already control almost 90 per cent of the market. There is clear evidence that consumers pay more when markets are concentrated.

“The ACCC’s concern was that with this merger, mobile data prices will be higher than they would be otherwise. These concerns were reinforced by statements from the industry welcoming the merger and the consequent “rational” pricing.”

Mr Sims shrugged off the ACCC defeat, saying the watchdog was successful in more than 80 per cent of the cases it brought. It opposed mergers every year and very few decisions were challenged in court.

“We stand by our decision to oppose this merger. If the ACCC won 100 per cent of the cases we took it would be a sign we weren’t doing our job properly; by only picking “safe” cases and not standing up for what we believe in.”

‘The courts has come to the view that the proposed merger would not have the effect, or be likely to have the effect of substantially reducing competition … the merger can proceed,’ the court ruled, according to ABC News.

The ACCC had argued the two companies should not merge because it would put a halt to TPG becoming Australia’s fourth mobile network operator, which would take on Optus, Vodafone and Telstra.

According to Mr Teoh, the telco’s current financial health and fiercer competition from Telstra and Optus had shut the door on any mobile products.

“The company position today is different to what it was in 2017 — we have a deteriorating balance sheet, our debt is very high … the bank would reduce our borrowing from next year,” he told the court.

On Thursday Justice Middleton said he accepted Mr Teoh’s evidence – including TPG abandoning plans to roll out its own mobile network- even weaving the father of communism into his judgment.

“Rational market participants will act upon any lessons they might have gained from the previous TPG roll out of a mobile network,” he said.

“To misquote Karl Marx, history repeats itself only when you ignore it. I do not imagine Mr Teoh will ignore history.

“Mr Teoh will have learnt many lessons from his experience in rolling out a retail mobile network and its aftermath, including the lessons learnt as a consequence of these proceedings.”

 

More to come.

(Photo: Federico Gambarini/dpa)

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