ACCC Rejects Telco Merger Between TPG And Vodafone Australia

The ACCC was due to hand down its ruling tomorrow but accidentally published its decision online this afternoon.

“The ACCC has decided to oppose the proposed merger,” the regulator said in a short statement. “This information was inadvertently published online on our mergers register briefly this afternoon.”

The decision will surprise many industry analysts and comes after the ACCC flagged concerns over the impact to consumers.

Following its premature announcement, the ACCC released a statement saying it believed the merger would reduce competition and contestability in the telco sector.

The decision to reject the proposed merger is based on a belief that TPG will otherwise come to market as a fourth option for mobile customers.

“TPG is the best prospect Australia has for a new mobile network operator to enter the market, and this is likely the last chance we have for stronger competition in the supply of mobile services,” ACCC Chairman Rod Sims said.

“Wherever possible, market structures should be settled by the competitive process, not by a merger which results in a market structure that would be subject to little challenge in the future. This is particularly the case in concentrated sectors, such as mobile services in Australia.

“TPG has a proven track record of disrupting the telecommunications sector and establishing itself as a successful competitor to the benefit of consumers. TPG is likely to be a vigorous and innovative supplier of mobile services in Australia, offering cheaper mobile plans with large data allowances, and competing strongly against incumbents Telstra, Optus and Vodafone,” Mr Sims said.

The merger had support from much of the industry including from consumer advocate Australian Communications Consumer Action Network, but in December the ACCC announced it was delaying the decision to better understand the impact on mobile customers.

Vodafone Australia is joint-owned by UK company Vodafone Group and Hong Kong-based firm Hutchison, and has the third-biggest mobile network in the country and a small business providing NBN plans.

TPG is primarily a fibre infrastructure and broadband retail business. It also owns iiNet and Internode and has extensive fibre networks and high-density cells in metropolitan areas that would have significantly boosted Vodafone’s efforts to rollout 5G mobile technology.

Following the news of the ACCC’s opposition to the merger, TPG’s share price fell dramatically by 14 percent while Hutchison Telecommunication’s dropped by 28 percent nearing the close of trade.

Under the merger, the two telcos would have combined their different assets to challenge the dominance of Telstra and Optus.

However when the merger was announced, TPG was publicly planning to come to market with its own mobile deal for customers that promised to offer a cheap and potentially disruptive option for mobile customers for just $9 a month.

Whether TPG truly had intentions to take on Telstra, Optus and Vodafone with its own mobile network remains a point of contention for some in the industry. In an already crowded mobile market, it’s unlikely Australia has the population to viably support four mobile operators given the high cost of rolling out and maintaining a network.

In December, the ACCC chairman Rod Sims noted: “Our preliminary view is that TPG is currently on track to become the fourth mobile network operator in Australia, and as such it’s likely to be an aggressive competitor.”

However in January, TPG announced it would cease the rollout of its mobile network, blaming added costs due to the Australian government’s ban on the use of equipment from Chinese vendor Huawei to build Australia’s 5G mobile networks.

TPG said it had spent $100 million on its mobile rollout and committed a further $30 million. In 2017 it also paid $1.26 billion for mobile spectrum.

Many saw TPG’s January announcement as a way to put pressure on the ACCC to approve the merger, and use the Huawei ban as a scapegoat.

Telecom expert Paul Budde said the merger made sense for both companies.

Ahead of the regulator’s decision, ACCAN chief executive Teresa Corbin said the consumer organisation did not oppose the merger.

“TPG is more focused on broadband, while Vodafone has a stronger presence in the mobile market, so really they are complementary,” she told ITWire earlier this week.

“A strong third player in the telecommunications market, like the proposed merged company, could also have greater power to place pressure on Telstra and Optus to lower their prices, increasing affordability for consumers.”―News.com.au