Vodafone Australia, TPG Telecom merger blocked by regulator; companies say they will take court action
- Australian competition regulator blocks planned US$7.7 billion deal that would merge TPG Telecom and Vodafone Hutchison Australia Pty
- Regulator cited in December concerns of ‘substantial lessening of competition’ and higher prices arising from planned merger
A planned US$7.7 billion merger of Vodafone Group Plc’s struggling Australian business with TPG Telecom was blocked by the Australian competition regulator on Wednesday, but the two companies said they will file a legal action in the Federal Court in response to the decision.
The Australian Competition and Consumer Commission (ACCC) confirmed Wednesday that “it has decided to oppose the proposed merger.” The decision, which had been scheduled for release Thursday, was briefly visible on the regulator’s website minutes earlier before it was removed.
“This information was inadvertently published online on our mergers register briefly this afternoon,” the ACCC said. “We intend to publish a further media release shortly.”
Vodafone Hutchison Australia Pty (VHA), Vodafone’s unprofitable mobile-phone venture with CK Hutchison Holdings, had planned to merge with broadband provider TPG Telecom to challenge market leader Telstra Corp. The new entity would have been worth as much as A$10.9 billion (US$7.7 billion), the companies said last year.
VHA and TPG said the legal action will involve seeking declaratory relief from the Federal Court which has jurisdiction to decide if the merger should be permitted on the basis that it will not substantially lessen competition.
“VHA respects the ACCC process, but we believe the merger with TPG will bring very real benefits to consumers,” said VHA chief executive Iñaki Berroeta in the statement.
The country’s antitrust watchdog had signalled its concern about the proposed deal in December, saying that removing TPG from the market as a stand alone entity would likely result in a “substantial lessening of competition” and higher prices.
But Berroeta said the proposed merger is about combining two complementary businesses, which have very little overlap and can deliver more for Australian consumers together than they can alone.
“VHA is an established mobile business with less than 1 per cent of the fixed broadband market, while TPG is the second largest fixed broadband player with no mobile network,” said Berroeta.
He said the company remains firmly committed to the merger.
VHA and TPG Telecom have agreed to extend the term of the scheme documents to August 31, 2020 to allow sufficient time for the Federal Court process to conclude and for the merger process to be completed.
Shares of TPG Telecom tumbled 14 per cent in Sydney on Wednesday, while Hutchison Telecommunications Australia, home to CK Hutchison’s stake in the mobile phone company, lost 28 per cent. Telstra fell 2.8 per cent.
